<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-25090
-------
STILLWATER MINING COMPANY
-------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 81-0480654
- ------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE TABOR CENTER
1200 SEVENTEENTH STREET, SUITE 900
DENVER, COLORADO 80202
- ---------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(303) 352-2060
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO
---- ----
AT OCTOBER 6, 1998, 20,660,886 SHARES OF COMMON STOCK, $.01 PAR VALUE PER
SHARE, WERE ISSUED AND OUTSTANDING.
1
<PAGE>
STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.......................................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................. 16
ITEM 2. CHANGES IN SECURITIES......................................... 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 16
ITEM 5. OTHER INFORMATION............................................. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 16
SIGNATURES.................................................................... 18
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
<S> <C> <C>
STILLWATER MINING COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per
share amounts)
(Unaudited)
SEPTEMBER 30, December 31,
1998 1997
--------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,658 $ 4,191
Short-term investments -- 13,468
Inventories 8,035 7,380
Accounts receivable 16,375 6,926
Other current assets 2,422 1,349
Deferred income taxes 1,989 1,989
--------------- ---------------
Total current assets 35,479 35,303
PROPERTY, PLANT AND EQUIPMENT, NET OTHER
NONCURRENT ASSETS 213,780 191,254
2,478 2,662
--------------- ---------------
Total assets $ 251,737 $ 229,219
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
and capital lease obligations $ 1,562 $ 1,982
Accounts payable 6,440 2,709
Accrued payroll and benefits 2,116 1,972
Property, production and
franchise taxes payable 4,063 3,682
Other current liabilities 4,310 1,904
--------------- ---------------
Total current liabilities 18,491 12,249
LONG-TERM LIABILITIES
Long-term debt and
capital lease obligations 60,491 61,513
Other noncurrent liabilities 3,536 2,283
Deferred income taxes 16,686 11,782
--------------- ---------------
Total liabilities 99,204 87,827
--------------- ---------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value,
1,000,000 shares authorized, none issued --- ---
Common stock, $.01 par value, 50,000,000 shares
authorized, 20,651,448 and 20,377,623
issued and outstanding 207 204
Paid-in capital 144,497 141,193
Accumulated earnings (deficit) 7,829 (5)
--------------- ---------------
Total shareholders' equity 152,533 141,392
--------------- ---------------
Total liabilities and shareholders' equity $ 251,737 $ 229,219
=============== ===============
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 28,198 $ 16,998 $ 76,234 $ 55,293
COSTS AND EXPENSES
Cost of metals sold 17,178 15,540 49,698 50,549
Depreciation and amortization 3,049 2,876 8,814 8,606
------------ ----------- ---------- -----------
Total cost of sales 20,227 18,416 58,512 59,155
General administrative expense and other 1,314 281 3,096 1,091
------------ ----------- ---------- -----------
Total costs and expenses 21,541 18,697 61,608 60,246
------------ ----------- ---------- -----------
OPERATING INCOME (LOSS) 6,657 (1,699) 14,626 (4,953)
OTHER INCOME (EXPENSE)
Interest income 149 248 662 775
Interest expense, net of capitalized interest
of $565, $22, $1,140 and $764 (645) (1,256) (2,550) (3,192)
------------ ----------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 6,161 (2,707) 12,738 (7,370)
INCOME TAX (PROVISION) BENEFIT (2,371) 1,043 (4,904) 2,838
------------ ----------- ---------- -----------
NET INCOME (LOSS) $ 3,790 $ (1,664) $ 7,834 $ (4,532)
============ =========== ========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.18 $ (0.08) $ 0.38 $ (0.22)
============ =========== ========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 20,608 20,341 20,506 20,230
Diluted 21,030 20,341 20,884 20,230
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<S> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1998 1997
----------------- --------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 18,737 $ (3,072)
(NOTE 7) ----------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (40,809) (12,596)
Purchase of short-term investments (2,256) (10,412)
Proceeds from maturity of short-term investments 15,724 14,177
Proceeds from sale/leaseback transactions 9,206 --
----------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (18,135) (8,831)
----------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 3,307 1,511
Payments on long-term debt and capital lease Obligations (1,442) (1,034)
Proceeds from capital leases -- 855
----------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,865 1,332
----------------- --------------
CASH AND CASH EQUIVALENTS
Net increase (decrease) 2,467 (10,571)
Balance at beginning of period 4,191 16,389
----------------- --------------
BALANCE AT END OF PERIOD $ 6,658 $ 5,818
================= ==============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the Company's financial
position as of September 30, 1998 and the results of operations and cash flows
for the three and nine month periods ended September 30, 1998 and 1997. Certain
amounts in the accompanying consolidated financial statements for 1997 have been
reclassified to conform to the classifications used in 1998. The results of
operations for the three month and nine month periods are not necessarily
indicative of the results to be expected for the full year. The accompanying
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1997 annual report on Form 10-K.
NOTE 2 - NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. This
statement establishes standards for reporting and presentation of comprehensive
income and its components. The effect of adopting SFAS No. 130 was not material
for any of the periods presented.
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement is effective for the fiscal year beginning January 1, 2000 and
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company is currently assessing the impact of this
statement.
Additionally in June 1998, the FASB issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 is effective
for fiscal year 1999 and requires that the costs of start-up activities,
including organization costs, be expensed as incurred. The Company has yet to
determine the effect of this statement on the Company's financial statements.
NOTE 3 - INVENTORIES
Inventories consisted of the following (in thousands):
(Unaudited)
SEPTEMBER 30, December 31,
1998 1997
---------------- --------------
Metals inventory
Raw ore $ 1,185 $ 460
Concentrate and in-process 3,457 3,604
---------------- --------------
4,642 4,064
Materials and supplies 3,393 3,316
---------------- --------------
$ 8,035 $ 7,380
================ ==============
<PAGE>
NOTE 4 - LONG-TERM DEBT
The Company has obtained a commitment letter from The Bank of Nova
Scotia for a $175 million syndicated senior secured credit facility ("the
Scotiabank Credit Facility"). The facility provides for a $125 million term loan
facility and a $50 million revolving credit facility. The Company expects the
Scotiabank Credit Facility to bear interest at LIBOR plus 1% to 1.75% depending
upon the Company's ratio of debt to operating cash flow. The Company expects to
be able to draw the term loan facility down until December 31, 2000, and expects
amortization to commence on March 31, 2001. The final maturity of both
facilities is expected to be December 31, 2005. The Scotiabank Credit Facility
is expected to be secured by substantially all of the property and assets of the
Company. Lending is subject to certain conditions precedent and the loan
contains typical financial and operating covenants.
NOTE 5 - SALES COMMITMENTS
The Company may use derivative instruments to manage its exposure to
market risk from changes in palladium and platinum commodity prices, interest
rates or the value of its assets and liabilities. Derivative instruments which
are designated as hedges must be deemed effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge at
the inception of the contract.
As of the end of the third quarter 1998, the Company had 38,350 ounces
of palladium sold forward at an average price of $150 per ounce, all to be
delivered in the fourth quarter of 1998. The Company has 250 ounces of
palladium sold forward for delivery in 1999 at an average price of $277 per
ounce. The Company had 12,400 ounces of platinum sold forward in the fourth
quarter of 1998 at an average price of $379 per ounce. In 1999, the Company has
8,500 ounces of platinum sold forward at an average price of $392 per ounce.
The Company has entered into new long-term marketing contracts with
General Motors Corporation, Ford Motor Company, Mitsubishi Corporation and KEMET
Corp. The contracts cover the Company's production over the five-year period
from January 1999 through December 2003. Under the contracts, the Company has
committed between 90% to 100% of its palladium production. Palladium sales are
priced at a slight discount to market, with a floor price averaging
approximately $225 per ounce. The Company has agreed to an average maximum
palladium price of approximately $400 per ounce on approximately 30% of its
production. The remaining 70% of the Company's palladium production is not
subject to any price cap. In addition, the Company has committed approximately
20% of its planned annual platinum production over the next five years. Platinum
sales are priced at a slight discount to market, subject to an average minimum
price of $350 per ounce with an average maximum price of $425 per ounce. The
remaining 80% of the Company's planned annual platinum production is not
committed under these contracts. Such platinum production remains available for
sale at prevailing market prices or under future contracts. The marketing
contracts contain termination provisions that allow the purchasers to terminate
in the event the Company breaches and the breach is not cured within periods
ranging from ten to thirty days of notice by the purchaser. In addition, the
contracts contain force majeure provisions that allow for the suspension and, in
one instance, the termination of the contract upon the occurrence of an event of
force majeure.
NOTE 6 - EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share." All
prior period earnings per share data presented have been restated to conform to
the provisions of this statement.
Outstanding options to purchase 1,269,284 and -0- shares of common
stock were included in the computation of diluted earnings per share for the
three month periods ended September 30, 1998 and 1997, respectively.
Outstanding options to purchase 71,475 and 1,246,484 shares of common stock were
excluded from the computation of diluted earnings per share for the three month
periods ended September 30, 1998 and 1997, respectively, because to do so would
have been antidilutive using the treasury stock method.
7
<PAGE>
Outstanding options to purchase 1,155,659 and -0- shares of common
stock were included in the computation of diluted earnings per share for the
nine month periods ended September 30, 1998 and 1997, respectively. Outstanding
options to purchase 185,100 and 1,246,484 shares of common stock were excluded
from the computation of diluted earnings per share for the nine month periods
ended September 30, 1998 and 1997, respectively, because to do so would have
been antidilutive using the treasury stock method.
In addition, approximately 1.9 million shares of common stock issuable
under the terms of the Company's 7% Convertible Subordinated Notes Due 2003 were
excluded from the computation of diluted earnings per share for the three month
and nine month periods ended September 30, 1998 and 1997, because to do so would
have been antidilutive.
NOTE 7 - CASH FLOW INFORMATION
Reconciliation of net income (loss) to net cash provided by (used in) operating
activities is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Nine months ended September 30, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 7,834 $ (4,532)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 8,814 8,606
Deferred income taxes 4,904 (2,838)
Other 263 729
Changes in operating assets and liabilities:
Decrease (increase) in inventories (655) 4,881
Increase in accounts receivable (9,449) (6,015)
Increase in other current assets (1,073) (481)
Decrease in other noncurrent assets 184 288
Increase (decrease) in accounts payable 3,731 (2,913)
Increase (decrease) in payables and other accrued liabilities 2,931 (1,590)
Increase in noncurrent liabilities 1,253 793
- ---------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $18,737 $(3,072)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASE AGREEMENTS
In September 1998, the Company completed the sale leaseback of a tunnel
boring machine and miscellaneous other mining equipment. The leases are
classified as operating leases for financial reporting purposes and are non-
cancelable with terms of seven years. Rental expense during third quarter 1998
approximated $0.1 million. The annual rental payments during the term of the
leases are approximately $1.5 million.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STILLWATER MINING COMPANY
KEY FACTORS
(Unaudited)
The following table sets forth the amounts of palladium and platinum produced
and sold by the Company and the cash and total costs attributed to the mine
operations during the three and nine month periods ended September 30, 1998 and
1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OUNCES PRODUCED/(1)/
Palladium (000) 87 71 255 191
Platinum (000) 26 22 78 59
---------- ----------- ----------- ----------
Total 113 93 333 250
TONS MINED 200 147 547 402
TONS MILLED (000)/(2)/ 191 147 537 402
MILL HEAD GRADE (OUNCES PER TON)/(3)/ 0.66 0.72 0.69 0.71
MILL RECOVERY (%) 92 89 92 88
CASH COSTS PER TON MILLED $ 90 $ 107 $ 93 $ 112
OUNCES SOLD/(2)/
Palladium (000) 88 68 253 203
Platinum (000) 28 21 77 64
----------- ----------- ----------- ----------
Total 116 89 330 267
CASH COSTS PER OUNCE/(4)/ $ 151 $ 169 $ 150 $ 180
Depreciation and amortization 27 31 27 35
----------- ----------- ----------- ----------
Total costs per ounce
produced/(4)/ $ 178 $ 200 $ 177 $ 215
AVERAGE REALIZED PRICE PER OUNCE
Palladium $ 204 $ 131 $ 184 $ 149
Platinum $ 369 $ 386 $ 383 $ 391
Combined /(5)/ $ 244 $ 191 $ 231 $ 207
AVERAGE MARKET PRICE PER OUNCE
Palladium $ 294 $ 197 $ 285 $ 169
Platinum $ 369 $ 422 $ 381 $ 396
Combined /(5)/ $ 312 $ 250 $ 305 $ 223
</TABLE>
/(1) / Ounces produced is defined as the number of ounces produced from the
concentrator during the period reduced by losses expected to be incurred
in subsequent smelting and refining processes.
/(2) / Tons milled represents the number of grade-bearing tons fed to the
concentrator.
/(3) / Mill head grade is presented as ounces per ton of palladium and platinum
combined.
/(4) / Cash costs include cash costs of mine operations, processing and
administrative expenses at the mine site (including overhead, taxes other
than income taxes, royalties, and credits for metals produced other than
9
<PAGE>
palladium and platinum). Total costs of production include cash costs plus
depreciation and amortization. Income taxes, general and administrative
expense and interest income and expense are not included in either total
or cash costs.
/(5)/ Stillwater Mining reports a combined average realized price of palladium
and platinum at the same ratio as ounces are produced from the base
metals refinery. The same ratio is applied to the combined average
market price.
10
<PAGE>
This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include comments
regarding anticipated capital expenditures and sources of financing for capital
expenditures and benefit from net operating loss carryforwards. In addition to
factors discussed below, the factors that could cause actual results to differ
materially include, but are not limited to, the following: supply and demand of
palladium and platinum; unexpected events during facility expansion;
fluctuations in ore grade, tons mined, crushed or milled; variations in smelter
or refinery operation; amounts and prices of the Company's forward metals
sales, and geological, technical, permitting, mining or processing issues. For a
more detailed description of risks attendant to the business and operations of
Stillwater and to the mining industry in general, please see the Company's other
SEC filings, in particular the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
RESULTS OF OPERATIONS
Three months ended September 30, 1998 compared to three months ended September
- ------------------------------------------------------------------------------
30, 1997
- --------
Revenues
--------
Revenues for the third quarter of 1998 increased $11.2 million, or
66%, to $28.2 million compared to $17.0 million in the same period of 1997. The
increase in revenue was primarily due to a 30% increase in the quantity of metal
sold combined with a 56% increase in the average realized price per ounce of
palladium sold.
During the third quarter of 1998, the Company sold 88,000 ounces of
palladium and 28,000 ounces of platinum at average realized prices of $204 and
$369, respectively, compared with sales of 68,000 ounces of palladium and 21,000
ounces of platinum at average realized prices of $131 and $386, respectively,
in the prior year's comparable period. During the third quarter of 1998, the
average market prices of palladium and platinum were $294 and $369,
respectively. As a result of hedge contracts that were entered into in 1997, the
Company realized $7.9 million less revenue in the third quarter of 1998 than
would have been realized if metal had been delivered at prevailing average
market prices. In the comparable period of 1997, a hedging loss of $5.3 million
resulted.
During the third quarter of 1998, the Company increased production 22%
to 87,000 ounces of palladium and 26,000 ounces of platinum compared with
production of 71,000 ounces of palladium and 22,000 ounces of platinum in the
third quarter of 1997.
Costs and Expenses
------------------
Total cost of sales increased by $1.8 million, or 10%, from $18.4
million in the third quarter of 1997 to $20.2 million in the third quarter of
1998. The cash costs per ounce decreased 11% from $169 in the third quarter of
1997 to $151 in 1998. The decrease in costs resulted from increased throughput
and processing efficiencies achieved as a result of the completion of an
expansion at the Stillwater Mine. During 1997, the facility increased production
capacity from 1,200 tons per day in the first quarter of 1997 to 2,000 tons per
day in the fourth quarter of 1997. In addition, the mill recovery increased from
89% in the third quarter of 1997 to 92% in the third quarter of 1998.
Operating Income (Loss)
-----------------------
As a result of the increase in revenues and the decrease in operating
costs discussed above, operating income in the third quarter of 1998 increased
to $6.7 million compared with an operating loss of $1.7 million in the
comparable period of 1997.
11
<PAGE>
Net Income (Loss)
-----------------
The Company's income before income taxes amounted to $6.2 million in
the third quarter of 1998 compared to a loss before income taxes of $2.7 million
in the third quarter of 1997. In the third quarter of 1998, the Company provided
for $2.4 million of income taxes compared to a recorded tax benefit of $1.0
million in the third quarter of 1997. The Company has provided for deferred
income taxes at the statutory rate of 38.5%; however, as a result of
approximately $46.6 million of net operating loss carryforwards existing at
December 31, 1997, the Company does not expect to incur any material cash income
tax liability until future years. As a result, the Company reported net income
of $3.8 million, or $0.18 per basic and diluted share in the third quarter of
1998, compared to a net loss of $1.7 million, or $0.08 per basic and diluted
share in the third quarter of 1997.
RESULTS OF OPERATIONS
Nine months ended September 30, 1998 compared to nine months ended September 30,
- --------------------------------------------------------------------------------
1997
- ----
Revenues
--------
Revenues for the first nine months of 1998 increased $20.9 million, or
38%, to $76.2 million compared to $55.3 million in the same period of 1997.
The increase in revenue was primarily due to a 24% increase in the quantity of
metal sold combined with a 23% increase in the average realized price per ounce
of palladium sold.
During the first nine months of 1998, the Company sold 253,000 ounces
of palladium and 77,000 ounces of platinum at average realized prices of $184
and $383, respectively, compared with sales of 203,000 ounces of palladium and
64,000 ounces of platinum at average realized prices of $149 and $391,
respectively, in the prior year's comparable period. During the first nine
months of 1998, the average market prices of palladium and platinum were $285
and $381, respectively. As a result of hedge contracts that were entered into in
1997, the Company lost $24.4 million in revenue in the first nine months of 1998
than would have been realized if metal had been delivered at prevailing average
market prices. In the comparable period of 1997, a hedging loss of $4.3 million
resulted.
As of September 30, 1998, the Company had 38,350 ounces of palladium
sold forward at an average price of $150 per ounce, all to be delivered in the
fourth quarter of 1998. The Company has 250 ounces of palladium sold forward for
delivery in 1999 at an average price of $277 per ounce. The Company had 12,400
ounces of platinum sold forward in the fourth quarter of 1998 at an average
price of $379 per ounce. In 1999, the Company has 8,500 ounces of platinum sold
forward at an average price of $392 per ounce.
During the first nine months of 1998, the Company increased production
33% to 255,000 ounces of palladium and 78,000 ounces of platinum compared with
production of 191,000 ounces of palladium and 59,000 ounces of platinum in the
first nine months of 1997.
Costs and Expenses
------------------
Total cost of sales decreased by $0.7 million, from $59.2 million in
the first nine months of 1997 to $58.5 million in the first nine months of 1998.
The cash costs per ounce produced decreased 17% from $180 in the first nine
months of 1997 to $150 in the first nine months of 1998. The decrease in costs
resulted from increased throughput and processing efficiencies achieved as a
result of the completion of an expansion at the Stillwater Mine. During 1997,
the facility increased production capacity from 1,200 tons per day in the first
quarter of 1997 to 2,000 tons per day in the fourth quarter of 1997. Materials
handling and processing efficiencies were also realized upon commissioning of
the production shaft in June 1997. In addition, the mill recovery increased from
88% in the first nine months of 1997 to 92% in the first nine months of 1998.
12
<PAGE>
Operating Income (Loss)
-----------------------
As a result of the increase in revenues and the decrease in operating
costs discussed above, operating income in the first nine months of 1998
increased by $19.6 million to $14.6 million compared with an operating loss of
$5.0 million in the comparable period of 1997.
Net Income (Loss)
-----------------
The Company's income before income taxes amounted to $12.7 million in
the first nine months of 1998 compared to a loss before income taxes of $7.4
million in the first nine months of 1997. In the first nine months of 1998, the
Company provided for $4.9 million of income taxes compared to a recorded tax
benefit of $2.8 million in the same period of 1997. The Company has provided for
deferred income taxes at the statutory rate of 38.5%; however, as a result of
approximately $46.6 million of net operating loss carryforwards existing at
December 31, 1997, the Company does not expect to incur any material cash income
tax liability until future years. As a result, the Company reported net income
of $7.8 million, or $0.38 per basic and diluted share in the first nine months
of 1998, compared to a net loss of $4.5 million, or $0.22 per basic and diluted
share in the same period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1998 was $17.0 million
compared to $23.1 million at December 31, 1997. The ratio of current assets to
current liabilities was 1.9 at September 30, 1998, compared to 2.9 at December
31, 1997.
Net cash provided by operating activities for the first nine months of
1998 was $18.7 million compared to net cash used of $3.1 million in the first
nine months of 1997. The $21.8 million increase in operating cash flow in 1998
is primarily attributable to an increase in the Company's net income of $12.4
million and an increase in the provision for deferred income taxes of $7.7
million.
A total of $18.1 million of net cash was used in investing activities
in the first nine months of 1998 compared to $8.8 million in the first nine
months of 1997. The increased usage was due to an increase in capital
expenditures as a result of the development at the East Boulder project and the
Stillwater Mine expansion. The Company's financing activities provided $1.9
million in net cash in the first nine months of 1998 compared to $1.3 million in
the first nine months of 1997. As a result of the above, cash and cash
equivalents increased by $2.5 million in the first nine months of 1998 compared
with a decrease of $10.6 million in the comparable period of 1997.
In September 1998, the Company completed the sale leaseback of a
tunnel boring machine and miscellaneous other mining equipment. The leases are
classified as operating leases for financial reporting purposes and are non-
cancelable with terms of seven years. Rental expense during the third quarter
1998 approximated $0.1 million. The annual rental payments during the term of
the leases are approximately $1.5 million.
The Company recently announced plans to expand the Stillwater Mine and
to develop the East Boulder project. Total capital to fund the expansion is
expected to approximate $385 million. Of this, the Stillwater Mine expansion is
expected to cost $75 million, East Boulder is expected to cost approximately
$270 million, and approximately $40 million is designated for the expansion of
the Company's smelter and base metals refinery located in Columbus, Montana.
During the remainder of 1998, the Company expects to invest approximately $39.2
million in connection with the expansion plans. The Company intends to finance
the expansion with operating cash flow and external financing.
During the third quarter of 1998, the Company entered into marketing
contracts with General Motors Corporation, Ford Motor Company, Mitsubishi
Corporation and KEMET Corp. These contracts cover the Company's PGM production
13
<PAGE>
over the five-year period from January 1999 through December 2003. During this
period, the Company has committed between 90% to 100% of its palladium
production and approximately 20% of its planned annual platinum production.
Palladium and platinum sales are priced at a slight discount to market, with
floor prices on substantially all of the Company's production committed under
these contracts averaging $225 per ounce of palladium and $350 per ounce of
platinum. The Company has also agreed to an average maximum price of
approximately $400 per ounce on approximately 30% of its palladium production
and $425 per ounce on approximately 20% of its planned annual platinum
production.
In addition, the Company has an unsecured working capital line of
credit with NM Rothschild and Sons, Ltd., with a maximum borrowing capacity of
$45 million, which expires on April 30, 1999. As of September 30, 1998, there
were no borrowings against this credit line and the Company could borrow up to
$13.5 million based upon quarterly borrowing calculations under the terms of the
agreement. This facility will be cancelled concurrent with completion of the
Scotiabank Credit Facility.
The Company has obtained a commitment letter from The Bank of Nova
Scotia for a $175 million credit facility. The commitment letter for the
Scotiabank Credit Facility provides for a $125 million term loan facility and a
$50 million revolving credit facility. We expect to be able to borrow under the
term loan facility until December 31, 2000 and that amortization of the term
loan facility will commence on March 31, 2001. We expect that the final maturity
of the term loan facility and revolving credit facility will be December 31,
2005. The loans will be required to be prepaid from excess cash flow, proceeds
from asset sales and the issuance of debt or equity securities, subject to
specified exceptions. Proceeds of the term loan facility will be used to finance
a portion of the 1998 Expansion Plan. Proceeds of the revolving credit facility
will be used for our general corporate and working capital needs. At the
company's option, the Scotiabank Credit Facility will bear interest at LIBOR or
an alternate base rate, in each case plus a margin. The interest rate may be
adjusted depending upon the Company's ratio of debt to operating cash flow.
Substantially all the property and assets of the Company and its subsidiaries
and the stock of the Company's subsidiaries will be pledged as security for the
Scotiabank Credit Facility.
The bank's commitment is subject to numerous conditions, including the
completion of due diligence, the company's obtaining $50 million of additional
equity capital and the negotiation of definitive loan documentation. In
addition, conditions precedent to both initial and subsequent borrowings under
the term loan facility and revolving credit facility may include: (1) continued
performance of the marketing contracts; (2) receipt of satisfactory milestone
reports regarding the 1998 Expansion Plan; and (3) receipt of all government and
third party approvals necessary or advisable for the 1998 Expansion Plan.
Covenants in the Scotiabank Credit Facility will restrict: (1)
additional indebtedness; (2) payment of dividends or redemption of capital
stock; (3) liens; (4) investment, acquisitions, dispositions or mergers; (5)
transactions with affiliates; (6) capital expenditures (other than those
associated with the 1998 Expansion Plan); (7) refinancing or prepayment of
subordinated debt (excluding an underwritten call or conversion of the Company's
7% Convertible Subordinated Notes Due 2003);(8) changes in the nature of
business conducted or ceasing operations at the principal operating properties;
and (9) commodities hedging to no more than 90% of annual palladium production
and 75% of annual platinum production (excluding the sales covered by the
Company's marketing contracts and similar agreements). The Company also will be
subject to financial covenants including a debt to operating cash flow ratio, a
debt service coverage ratio and a debt to equity ratio.
Events of default will include: (1) a cross-default to other
indebtedness of the Company or its subsidiaries; (2) any material modification
to the life-of-mine plan for the Stillwater Mine; (3) a change of control of the
Company; (4) the failure to maintain annual palladium production of at least
315,000 ounces in the year 2000 and at least 490,000 ounces each year thereafter
or (5) any breach or modification of any of the marketing contracts. Default
under the Scotiabank Credit Facility may constitute a default under the
indenture associated with the Convertible Notes. The indenture for the
Convertible Notes also contains standard covenants and provisions for events of
default.
YEAR 2000 ISSUES
The Year 2000 will impact computer programs written using two digits
rather than four to define the applicable year. Any programs with time-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operation, including a temporary inability to process
transactions, send invoices or engage
14
<PAGE>
in other ordinary activities. This problem largely affects software programs
written years ago, before the issue came to prominence. The Company recently
reviewed all of its software for exposure to Year 2000 issues, and does not
believe that such software poses significant risks associated with the Year 2000
problem. The Company primarily uses third-party software programs written and
updated by outside firms, and the Company is in the process of determining
whether this software is Year 2000 compliant. In May 1996, the Company began the
implementation of new information technology infrastructure that the Company
believes will be fully Year 2000 compliant. This infrastructure is expected to
be in place by the fourth quarter of 1998. To assure that all software programs
can successfully work in conjunction with each other using this new
infrastructure, the Company plans on testing all of its software and hardware
during the first quarter of 1999 using a combination of past and future dates.
The Company does not believe that the costs associated with additional Year 2000
compliance will be material.
The Company has set in motion an effort to obtain written assurances
from its material suppliers regarding their Year 2000 compliance. As a result
of this effort, the Company expects to generate by the second quarter of 1999 a
validated list of suppliers that are Year 2000 compliant, and expects to use the
entities on the list to obtain its supplies.
The Company has also begun the process of obtaining written assurances
from the Company's material customers regarding their Year 2000 compliance. The
Company's goal is to obtain by the second quarter of 1999 written assurances
from its customers that they are Year 2000 compliant or that they are expecting
to become Year 2000 compliant before December 31, 1999.
Although the Company has taken significant steps to address the Year
2000 problem, there can be no assurance that the failure of the Company and/or
its material customers or suppliers to timely attain Year 2000 compliance will
not materially reduce the Company's revenues or income, or that these failures
and/or the impacts of broader compliance failures by telephone, mail, data
transfer or other utility or general service providers or government of private
entities will not have a material adverse effect on the Company.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
During the period covered by this report, there were no legal
proceedings instituted that are reportable.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
4.1 Indenture, dated April 29, 1996, between Stillwater
Mining Company and the Colorado National Bank, as
Trustee, with respect to the Company's 7% Convertible
Subordinated Notes Due 2003.
10.1 Employment Agreement, dated August 10, 1998, by and
between Stillwater Mining Company and William E.
Nettles.
10.2 Form of Employment Agreement, dated October 1, 1998,
between Stillwater Mining Company and each of Chris
Allen, John E. Andrews, Gil Clausen, Robert C. Lapple,
Craig Patrick, James A. Sabala and Gina Wilson.
10.3 Master Lease Agreement, dated September 10, 1998,
Addendum No. 1, Mining and Quarry Equipment Schedule No.
001 and Addendum to Schedule No.001, between General
Electric Capital Corporation (Lessor) and Stillwater
Mining Company (Lessee).
23.1 Consent of Behre Dolbear & Company, Inc. dated October
12, 1998.
23.2 Consent of H.A. Simons Ltd. dated October 12, 1998.
23.3 Consent of Kilborn International Inc. dated
October 12, 1998.
23.4 Consent of PricewaterhouseCoopers dated October 12,
1998.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Current Report on Form 8-K, dated July 21, 1998, reporting under
Item 5 and Item 7 that the Company had entered into sales
agreements for the sale of between 90% and 100% of its
16
<PAGE>
palladium production and approximately 20% of its planned annual
platinum production over the five-year period from January 1999
through December 31, 2003. No financial statements were filed with
this report.
Current Report on Form 8-K, dated October 1, 1998, reporting under
Item 5 that the Company had accelerated its expansion plans and
had signed a commitment letter for $175 million in secured
financing. No financial statements were filed with this report.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf of the
undersigned thereunto duly authorized.
STILLWATER MINING COMPANY
(Registrant)
Date: October 12, 1998 By: /s/ WILLIAM E. NETTLES
------------------------------------------
William E. Nettles
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: October 12, 1998 By: /s/ JAMES A. SABALA
------------------------------------------
James A. Sabala
Vice President and Chief Financial Officer
(Principal Financial Officer)
18
<PAGE>
Exhibit 4.1
STILLWATER MINING COMPANY
---------------------------------------------
7% Convertible Subordinated Notes Due 2003
---------------------------------------------
INDENTURE
Dated as of April 29, 1996
---------------------------------------------
COLORADO NATIONAL BANK,
as Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................................-2-
SECTION 1.02. Other Definitions..............................................-7-
SECTION 1.03. Incorporation by Reference of Trust Indenture Act..............-8-
SECTION 1.04. Rules of Construction..........................................-8-
ARTICLE II
The Convertible Notes
SECTION 2.01. Form and Dating............................................... -9-
SECTION 2.02. Execution and Authentication..................................-11-
SECTION 2.03. Registrar, Paying Agent and Conversion Agent..................-12-
SECTION 2.04. Paying Agent to Hold Money in Trust...........................-12-
SECTION 2.05. Noteholder Lists..............................................-12-
SECTION 2.07. Replacement Convertible Notes.................................-20-
SECTION 2.08. Outstanding Convertible Notes.................................-20-
SECTION 2.09. Treasury Convertible Notes....................................-21-
SECTION 2.10. Temporary Convertible Notes; Exchange of Global Note for
Certificated Convertible Note.................................-21-
SECTION 2.11. Cancellation..................................................-22-
SECTION 2.12. Defaulted Interest............................................-22-
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee............................................-22-
SECTION 3.02. Selection of Convertible Notes to be Redeemed.................-22-
SECTION 3.03. Notice of Redemption..........................................-23-
SECTION 3.04. Effect of Notice of Redemption................................-24-
SECTION 3.05. Deposit of Redemption Price...................................-24-
SECTION 3.06. Convertible Notes Redeemed in Part............................-24-
SECTION 3.07. Optional Redemption...........................................-24-
SECTION 3.08. Designated Event Offer........................................-25-
ARTICLE IV
Covenants
SECTION 4.01. Payment of Convertible Notes..................................-27-
SECTION 4.02. SEC Reports...................................................-27-
SECTION 4.03. Compliance Certificate........................................-27-
SECTION 4.04. Stay, Extension and Usury.....................................-28-
SECTION 4.05. Corporate Existence...........................................-28-
SECTION 4.06. Taxes.........................................................-28-
SECTION 4.07. Designated Event..............................................-29-
SECTION 4.08. Stockholders Rights Plan......................................-29-
-i-
<PAGE>
ARTICLE V
Conversion
SECTION 5.01. Conversion Privilege..........................................-29-
SECTION 5.02. Conversion Procedure..........................................-30-
SECTION 5.03. Fractional Shares.............................................-30-
SECTION 5.04. Taxes on Conversion...........................................-30-
SECTION 5.05. Company to Provide Stock......................................-31-
SECTION 5.06. Adjustment of Conversion Price................................-31-
SECTION 5.07. No Adjustment.................................................-34-
SECTION 5.08. Other Adjustments.............................................-34-
SECTION 5.09. Adjustments for Tax Purposes..................................-34-
SECTION 5.10. Adjustments by the Company....................................-35-
SECTION 5.11. Notice of Adjustment..........................................-35-
SECTION 5.12. Notice of Certain Transactions................................-35-
SECTION 5.13. Effect of Reclassifications, Consolidations,
Mergers or Sales on Conversion Privilege..........................-35-
SECTION 5.14. Trustee's Disclaimer..........................................-36-
ARTICLE VI
Subordination
SECTION 6.01. Agreement to Subordinate......................................-37-
SECTION 6.02. No Payment on Convertible Notes if Senior Debt in Default.....-37-
SECTION 6.03. Distribution on Acceleration of Convertible Notes; Dissolution
and Reorganization; Subrogation of Convertible Notes..............-38-
SECTION 6.04. Reliance by Senior Debt on Subordination Provisions...........-40-
SECTION 6.05. No Waiver of Subordination Provisions.........................-41-
SECTION 6.06. Trustee's Relation to Senior Debt.............................-41-
SECTION 6.07. Other Provisions Subject Hereto...............................-42-
ARTICLE VII
Successors
SECTION 7.01. Merger, Consolidation or Sale of Assets.......................-42-
SECTION 7.02. Successor Corporation Substituted.............................-43-
ARTICLE VIII
Defaults and Remedies
SECTION 8.01. Events of Default.............................................-43-
SECTION 8.02. Acceleration..................................................-44-
SECTION 8.03. Other Remedies................................................-44-
SECTION 8.04. Waiver of Past Defaults.......................................-45-
SECTION 8.05. Control by Majority...........................................-45-
SECTION 8.06. Limitation on Suits...........................................-45-
SECTION 8.07. Rights of Noteholders to Receive Payment......................-45-
SECTION 8.08. Collection Suit by Trustee....................................-46-
SECTION 8.09. Trustee May File Proofs of Claim..............................-46-
SECTION 8.10. Priorities....................................................-46-
-ii-
<PAGE>
SECTION 8.11. Undertaking for Costs.........................................-46-
ARTICLE IX
Trustee
SECTION 9.01. Duties of Trustee.............................................-47-
SECTION 9.03. Individual Rights of Trustee..................................-48-
SECTION 9.04. Trustee's Disclaimer..........................................-48-
SECTION 9.05. Notice of Defaults............................................-48-
SECTION 9.06. Reports by Trustee to Noteholders.............................-48-
SECTION 9.07. Compensation and Indemnity....................................-48-
SECTION 9.08. Replacement of Trustee........................................-49-
SECTION 9.09. Successor Trustee by Merger, Etc..............................-50-
SECTION 9.10. Eligibility; Disqualification.................................-50-
SECTION 9.11. Preferential Collection of Claims Against Company.............-50-
SECTION 9.12. Sections Applicable to Registrar, Paying Agent and Conversion
Agent.............................................................-50-
ARTICLE X
Discharge of Indenture
SECTION 10.01. Termination of Company's Obligations.........................-50-
SECTION 10.02. Repayment to Company.........................................-51-
ARTICLE XI
Amendments, Supplements and Waivers
SECTION 11.01. Without Consent of Noteholders...............................-51-
SECTION 11.02. With Consent of Noteholders..................................-52-
SECTION 11.03. Compliance with Trust Indenture Act..........................-53-
SECTION 11.04. Revocation and Effect of Consents............................-53-
SECTION 11.05. Notation on or Exchange of Convertible Notes.................-53-
SECTION 11.06. Trustee Protected............................................-54-
ARTICLE XII
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls.................................-54-
SECTION 12.02. Notices......................................................-54-
SECTION 12.03. Communication by Noteholders with Other Noteholders..........-54-
SECTION 12.04. Certificate and Opinion as to Conditions Precedent...........-54-
SECTION 12.05. Statements Required in Certificate or Opinion................-55-
SECTION 12.06. Rules by Trustee and Agents..................................-55-
SECTION 12.07. Legal Holidays...............................................-55-
SECTION 12.08. No Recourse Against Others...................................-55-
SECTION 12.09. Counterparts.................................................-55-
SECTION 12.10. Variable Provisions..........................................-55-
SECTION 12.11. GOVERNING LAW................................................-56-
SECTION 12.12. No Adverse Interpretation of Other Agreements................-56-
SECTION 12.13. Successors...................................................-56-
SECTION 12.14. Severability.................................................-56-
-iii-
<PAGE>
SECTION 12.15. Table of Contents, Headings, Etc.............................-56-
EXHIBIT A FORM OF CONVERTIBLE SUBORDINATED NOTES
EXHIBIT B FORMS OF TRANSFER CERTIFICATES
-iv-
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
310(a)(1) .............................................. 9.10
(a)(2) .............................................. 12.10
(a)(3) .............................................. N.A
(a)(4) .............................................. N.A
(b) .............................................. 9.08; 9.10
(c) .............................................. N.A.
311(a) .............................................. 9.11
(b) .............................................. 9.11
(c) .............................................. N.A.
312(a) .............................................. 2.05
(b) .............................................. 12.03
(c) .............................................. 12.03
313(a) .............................................. 9.06
(b)(1) .............................................. N.A.
(b)(2) .............................................. 9.06
(c) .............................................. 9.06
(d) .............................................. 9.06
314(a) .............................................. 4.02, 4.03
(b) .............................................. N.A.
(c)(1) .............................................. 12.04
(c)(2) .............................................. 12.04
(c)(3) .............................................. N.A.
(d) .............................................. N.A.
(e) .............................................. 12.05
(f) .............................................. N.A.
315(a) .............................................. 9.01(b)
(b) .............................................. 9.05
(c) .............................................. 9.01(a)
(d) .............................................. 9.01(c)
(e) .............................................. 8.11
316 (a) (last sentence).................................. 2.09
(a) (1) (A).............................................. 8.05
(a) (1) (B).............................................. 8.04
(a) (2) .............................................. N.A.
(b) .............................................. 8.07
(c) .............................................. 11.04
317(a) (1) .............................................. 8.08
(a) (2) .............................................. 8.09
(b) .............................................. 2.04
318(a) .............................................. N.A.
N.A. means not applicable.
_____________________
* This Cross-Reference Table is not part of the Indenture.
-v-
<PAGE>
INDENTURE dated as of April 29, 1996 between Stillwater Mining Company, a
Delaware corporation (the "Company") and Colorado National Bank, a national
banking association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Noteholders of the Company's 7% Convertible
Subordinated Notes Due 2003 (the "Convertible Notes"):
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions. "Affiliate" of any specified person means
------------ ---------
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities or by agreement or
otherwise; provided, however, that beneficial ownership of 10% or more of the
-------- -------
voting securities of a person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
-----
registrar.
"Board of Directors" means the Board of Directors of the Company or
------------------
any authorized committee of the Board.
"Board Resolution" means a duly authorized resolution of the Board of
----------------
Directors.
"Business Day" means any day that is not a Legal Holiday.
------------
"Capital Stock" means any and all shares, interests, participations,
-------------
rights or other equivalents (however designated) of equity interests in any
entity, including, without limitation, corporate stock and partnership
interests.
"Change of Control" means any event where: (i) any "person" or "group"
-----------------
(as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of shares representing more than 50% of the combined voting power
of the then outstanding securities entitled to vote generally in elections of
directors of the Company ("Voting Stock"), (ii) the Company consolidates with or
merges into any other corporation, or conveys, transfers or leases all or
substantially all of its assets (other than to a wholly-owned Subsidiary of the
Company) or any other corporation merges into the Company, and, in the case of
any such transaction, the outstanding Common Stock of the Company is
reclassified into or exchanged for any other property or security, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from, or to which its assets were conveyed, transferred or leased in
connection with, such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction or (iii) any
time the Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor
-2-
<PAGE>
corporation to the Company); provided, that a Change of Control shall not be
--------
deemed to have occurred if either (x) the last sale price of the Common Stock
for any five trading days during the ten trading days immediately preceding the
Change of Control is at least equal to 105% of the Conversion Price in effect on
the date of such Change of Control or (y) at least 90% of the consideration
(excluding cash payments for fractional shares) in the transaction or
transactions constituting the Change of Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States.
"Common Stock" means the common stock of the Company as the same
------------
exists at the date of the execution of this Indenture or as such stock may be
constituted from time to time.
"Company" means the party named as such above until a successor
-------
replaces it in accordance with Article VII and thereafter means the successor.
"Continuing Directors" means, as of any date of determination, any
--------------------
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Convertible Notes" means the Convertible Notes described above
-----------------
issued, authenticated and delivered under this Indenture.
"Daily Market Price" means the price of a share of Common Stock on the
------------------
relevant date, determined (a) on the basis of the last reported sale price of
the Common Stock as reported on the Nasdaq National Market, or if the Common
Stock is not then listed on the Nasdaq National Market, as reported on such
national securities exchange upon which the Common Stock is listed, or (b) if
there is no such last reported sale on the day in question, on the basis of the
average of the closing bid and asked quotations as so reported, or (c) if the
Common Stock is not listed on the Nasdaq National Market or on any national
securities exchange, on the basis of the average of the high bid and low asked
quotations on the day in question in the over-the-counter market as reported by
the National Association of Securities Dealers Automated Quotation System, or if
not so quoted, as reported by National Quotation Bureau, Incorporated, or a
similar organization.
"Default" means any event that is or, with the passage of time or the
-------
giving of notice or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
----------
their respective successors.
"Designated Event" means the occurrence of a Change of Control or a
----------------
Termination of Trading.
"Designated Senior Debt" means any Senior Debt which, at the date of
----------------------
determination, has an aggregate principal amount outstanding of, or commitments
to lend (without regard to borrowing base limitations), at least $10,000,000 and
is specifically designated in the instrument, as amended from time to time,
evidencing or governing such Senior Debt as "Designated Senior
-3-
<PAGE>
Debt" for purposes of this Indenture (provided, that such instrument may place
--------
limitations and conditions on the right of such Senior Debt to exercise the
rights of Designated Senior Debt).
"Excess Payment" means the excess of (a) the aggregate of the cash and
--------------
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in a tender offer or other
negotiated transaction over (b) the Daily Market Price of such acquired shares
on the Trading Day immediately after giving effect to the completion of such
tender offer or other negotiated transaction.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect from time to time.
"Global Notes" means, individually and collectively, the Regulation S
------------
Temporary Global Note, the Regulation S Permanent Global Note and the Rule 144A
Global Note.
"Guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, all Obligations,
------------
whether or not contingent, of such person (i) (a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of such person which is (1) given to secure all or part
of the purchase price of property subject thereto, whether given to the vendor
of such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances, (e) with
respect to indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or Guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of deferred and
unpaid purchase price of any property or assets, or (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements, on a net basis; (ii) with
respect to any obligation of others of the type described in the preceding
clause (i) or under clause (iii) below, assumed by or Guaranteed in any manner
by such person or in effect Guaranteed by such person through an agreement to
purchase (including, without limitation, "take or pay" and similar
arrangements), contingent or otherwise; and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"Indenture" means this Indenture, as amended from time to time.
---------
-4-
<PAGE>
"Initial Purchaser" means Salomon Brothers Inc.
-----------------
"Issuance Date" means the date on which the Convertible Notes are
-------------
first authenticated and issued.
"Material Subsidiary" means any Subsidiary of the Company which is a
-------------------
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).
"Noteholder" or "holder" means a person in whose name a Convertible
---------- ------
Note is registered.
"Obligations" means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum relating to the
-------------------
Convertible Notes dated April 24, 1996.
"Officers' Certificate" means a certificate signed by two Officers,
---------------------
one of whom must be the Chairman, the President, the Chief Financial Officer,
the Treasurer or a Vice-President of the Company. See Sections 12.04 and 12.05
hereof.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 12.04 and 12.05 hereof.
"person" means any individual, corporation, partnership, limited
------
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"principal" of a debt security means the principal of the security
---------
plus the premium, if any, on the security.
"Registration Agreement" means the Registration Agreement relating to
----------------------
the Convertible Notes dated April 29, 1996 between the Company and the Initial
Purchaser.
"Regulation S" means Regulation S, as amended, promulgated under the
------------
Securities Act.
"Regulation S Global Note" means the Regulation S Temporary Global
------------------------
Note or the Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global note
----------------------------------
that contains the paragraph referred to in footnote 1 and the additional
schedule referred to in the form of the Convertible Note attached hereto as
Exhibit A-1, and that is deposited with and registered in the name of the
Depositary, representing the Convertible Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global
----------------------------------
note in the form of the Convertible Note attached hereto as Exhibit A-2 that is
deposited with and registered in the name of the Depositary, representing the
Convertible Notes sold in reliance on Regulation S.
-5-
<PAGE>
"Representative" means the trustee, agent or representative (if any)
--------------
for an issue of Senior Debt.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
---------
"Rule 144A Global Note" means a permanent global note that contains
---------------------
the paragraph referred to in footnote 1 and the additional schedule referred to
in the form of the Convertible Note attached hereto as Exhibit A-1, and that is
deposited with and registered in the name of the Depositary, representing the
Convertible Notes sold in reliance on Rule 144A.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Debt" means the Obligations due on Indebtedness of the
-----------
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or Guaranteed by the Company; unless, in the instrument (as
amended from time to time) creating or evidencing Indebtedness or pursuant to
which Indebtedness is outstanding, it is expressly provided that such
Indebtedness is not senior in right of payment to the Convertible Notes. Senior
Debt includes, with respect to the Obligations described above, interest
accruing, pursuant to the terms of such Senior Debt, on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company,
whether or not post-filing interest is allowed in such proceeding, at the rate
specified in the instrument governing the relevant obligation. Notwithstanding
anything to the contrary in the foregoing, Senior Debt shall not include: (a)
Indebtedness of or amounts owed by the Company for compensation to employees, or
for goods, services or materials purchased in the ordinary course of business;
(b) Indebtedness of the Company to a Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary thereof; or (c) any
liability for Federal, state, local or other taxes, owed or owing by the
Company.
"Shelf Registration Statement" shall have the meaning set forth in the
----------------------------
Registration Agreement.
"Stockholder Rights Plan" shall mean that certain Rights Agreement
-----------------------
adopted by the Board of Directors of the Company in October 1995.
"Subsidiary" means any corporation, association or other business
----------
entity of which more than 50% of the total voting power of shares of Capital
Stock then outstanding entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by any person or one
or more of the other Subsidiaries of that person or a combination thereof.
"Termination of Trading" means an event where the Common Stock (or
----------------------
other common stock into which the Convertible Notes are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the United States; provided, that a Termination of Trading shall not be
deemed to have occurred if the Common Stock (or other common stock into which
the Convertible Notes are then convertible) is neither listed or approved for
trading as a result of a transaction that does not constitute a Change of
Control as described under clause (ii) of the definition of "Change of Control."
-6-
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-
---
77bbbb) as in effect on the date of execution of this Indenture.
"Trading Day" shall mean (A) if the applicable security is listed or
-----------
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or another
national securities exchange is open for business, (B) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (c) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
"Trustee" means the party named as such above until a successor
-------
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Trust Officer" when used with respect to the Trustee, means the
-------------
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any senior vice president, any vice
president, any assistant vice president, the secretary the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any senior trust
officer, any trust officer, the controller, any assistant controller, or any
other officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time are such officers, respectively, and
also means, with respect to a particular corporate trust matter, any officer to
whom such corporate trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"U.S. Person" has the meaning specified in Regulation S.
-----------
SECTION 1.02. Other Definitions.
-----------------
Defined in
Term Section
- ---- ----------
"Agent Members"...........................................................2.01
"Bankruptcy Law"..........................................................8.01
"Cedel"...................................................................2.01
"Commencement Date".......................................................3.08
"Conversion Agent"........................................................2.03
"Conversion Date".........................................................5.02
"Conversion Price"........................................................5.01
"Conversion Shares".......................................................5.06
"Custodian"...............................................................8.01
"Designated Event Offer"..................................................4.07
"Designated Event Payment"................................................4.07
"Designated Event Payment Date"...........................................3.08
"Distribution Date".......................................................5.06
"Distribution Record Date"................................................5.06
"Euroclear"...............................................................2.01
"Event of Default"........................................................8.01
"Institutional Accredited Investors"......................................2.01
-7-
<PAGE>
"Legal Holiday"...........................................................12.07
"Offer Amount"............................................................ 3.08
"Officer".................................................................12.10
"Paying Agent"............................................................ 2.03
"Payment Blockage Notice"................................................. 6.02
"Payment Blockage Period"................................................. 6.02
"Payment Default"......................................................... 8.01
"Purchase Agreement"...................................................... 2.01
"Purchase Date"........................................................... 5.06
"QIBs".................................................................... 2.01
"Registrar"............................................................... 2.03
"Restricted Convertible Notes"........................................... 2.01
"Rights".................................................................. 5.06
"Tender Period"........................................................... 3.08
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Convertible Notes;
--------------------
"indenture security holder" means a Noteholder;
-------------------------
"indenture qualified" means this Indenture;
-------------------
"indenture trustee" or "institutional trustee" means the Trustee; and
----------------- ---------------------
"obligor" on the Convertible Notes means the Company or any other
-------
obligor on the Convertible Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction. Unless the context otherwise
---------------------
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP consistently applied;
(c) references to "GAAP" shall mean GAAP in effect as of the time when
and for the period as to which such accounting principles are to be
applied;
(d) "or" is not exclusive;
-8-
<PAGE>
(e) words in the singular include the plural, and words in the plural
include the singular; and
(f) provisions apply to successive events and transactions.
ARTICLE II
The Convertible Notes
---------------------
SECTION 2.01. Form and Dating. The Convertible Notes and the
----------------
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 attached hereto. The Convertible Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage. Each Convertible
Note shall be dated the date of its authentication. The Convertible Notes shall
be issued in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. The terms and provisions contained in the Convertible Notes
shall constitute, and are hereby expressly made, a part of this Indenture and
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
(a) Global Notes. The Convertible Notes are being offered and sold by
------------
the Company pursuant to a purchase agreement relating to the Convertible Notes
dated April 23, 1996 between the Company and the Initial Purchaser (the
"Purchase Agreement").
Convertible Notes offered and sold to qualified institutional buyers
as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued
initially in the form of Rule 144A Global Notes, which shall be deposited on
behalf of the purchasers of the Convertible Notes represented thereby with the
Depositary at its office in The City of New York, and registered in the name of
the Depositary or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Rule 144A Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee as hereinafter provided. The Trustee shall not be liable for any
error or omission by the Depositary in making such record adjustments and the
records of the Trustee shall be controlling with regard to outstanding principal
amount of Convertible Notes hereunder.
Convertible Notes offered and sold in reliance on Regulation S shall
be issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Convertible Notes
represented thereby with the Trustee, at its office in St. Paul, Minnesota, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the investors' respective accounts at Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System ("Euroclear") or Cedel Bank Societe Anonyme ("Cedel") duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The "40-day restricted period" (as defined in Regulation S) shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel,
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a Rule 144A Global Note, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company.
-9-
<PAGE>
Following the termination of the 40-day restricted period, beneficial interests
in the Regulation S Temporary Global Note shall be exchanged for beneficial
interests in Regulation S Permanent Global Notes which will be deposited with a
custodian and registered in the name of a nominee of the Depositary.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided. The Trustee shall incur no liability for any error or
omission of the Depositary in making such record adjustments and the records of
the Trustee shall be controlling with regard to outstanding principal amount of
Regulation S Global Notes hereunder.
Each Global Note shall represent such of the outstanding Convertible
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Convertible Notes from time to
time endorsed thereon and that the aggregate amount of outstanding Convertible
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Convertible Notes represented thereby shall be made by the Trustee
or the custodian, at the direction of the Trustee, in accordance with
instructions given by the holder thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes that are held by the Agent Member through Euroclear or
Cedel.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
---------------------
the Rule 144A Global Note and the Regulation S Permanent Global Note deposited
with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver the Rule 144A Global Note and the
Regulation S Permanent Global Note which (i) shall be registered in the name of
the Depositary or the nominee of the Depositary and (ii) shall be delivered by
the Trustee to the Depositary or pursuant to the Depositary's instructions or
held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights either under this Indenture with respect to any Global Note held
on their behalf by the Depositary or by the Trustee as custodian for the
Depositary or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of
-10-
<PAGE>
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Certificated Convertible Notes. Except as provided in Sections
------------------------------
2.06(f) and 2.10, owners of beneficial interests in Global Notes will not be
entitled to receive physical delivery of certificated Convertible Notes.
Purchasers of Notes who are institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act and
referred to as "Institutional Accredited Investors") who are not QIBs will
receive certificated Convertible Notes bearing the Restricted Convertible Notes
Legend set forth in Exhibit A-1 hereto ("Restricted Convertible Notes").
Restricted Convertible Notes will bear the Restricted Convertible Notes Legend
set forth on Exhibit A-1 unless removed in accordance with Section 2.06(b)
hereof and may not be exchanged for a Global Note, or interest therein, at any
time.
Upon a transfer of any Convertible Note during the period of the
effectiveness of a Shelf Registration Statement with respect to the Convertible
Notes, all requirements pertaining to legends on such Convertible Note will
cease to apply, the requirements requiring any such Convertible Note issued to
certain holders be issued in global form will cease to apply, and a certificated
Convertible Note without legends will be available to the holder of such
Convertible Notes.
SECTION 2.02. Execution and Authentication. Two officers shall sign
----------------------------
the Convertible Notes for the Company by manual or facsimile signature. The
Company's seal shall be reproduced, either manually or by facsimile, on the
Convertible Notes.
If an officer whose signature is on a Convertible Note no longer holds
that office at the time the Convertible Note is authenticated, the Convertible
Note shall nevertheless be valid.
A Convertible Note shall not be valid until authenticated by the
manual signature of an authorized officer of the Trustee. The signature shall
be conclusive evidence that the Convertible Note has been authenticated under
this Indenture.
Upon a written order of the Company signed by two Officers, the
Trustee shall authenticate the Convertible Notes for original issue up to an
aggregate principal amount of $50,000,000 (plus up to $7,500,000 aggregate
principal amount of Convertible Notes that may be sold by the Company pursuant
to the over-allotment option granted pursuant to the Purchase Agreement). The
aggregate principal amount of Convertible Notes outstanding at any time shall
not exceed such amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Convertible Notes. An authenticating agent may
authenticate Convertible Notes whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal
with the Company or an Affiliate.
SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The
--------------------------- ----------------
Company shall maintain in the Borough of Manhattan in The City of New York (i)
an office or agency where Convertible Notes may be presented for registration of
transfer or for exchange ("Registrar"), (ii) an office or agency where
Convertible Notes may be presented for payment ("Paying Agent") and (iii) an
office or agency where Convertible Notes may be presented for conversion
("Conversion
-11-
<PAGE>
Agent"). The Registrar shall keep a register of the Convertible Notes and of
their transfer and exchange. The Company may appoint the Registrar, the Paying
Agent and the Conversion Agent and may appoint one or more co-registrars, one or
more additional paying agents and one or more additional conversion agents in
such other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any additional
conversion agent. The Company may change any Paying Agent, Registrar, co-
registrar or Conversion Agent without prior notice to any Noteholder. The
Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as
such. The Company or any of its Affiliates may act as Paying Agent, Registrar,
co-registrar or Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
-----------------------------------
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Convertible Notes, and will notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any money disbursed by it. Upon payment over to the
Trustee, the Paying Agent (if other than the Company or an Affiliate of the
Company) shall have no further liability for the money. If the Company or an
Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Noteholders all money held by it as
Paying Agent.
SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as
----------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before each interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
SECTION 2.06. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Notes. The transfer and exchange
-------------------------------------
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) Rule 144A Global Note to Regulation S Global Note. If, at
any time, an owner of a beneficial interest in a Rule 144A
Global Note deposited with the Depositary (or the Trustee as
custodian for the Depositary) wishes to transfer its
interest in such Rule 144A Global Note to a person who is
required or permitted to take delivery thereof in the form
of an interest in a Regulation S Global Note, such owner
-12-
<PAGE>
shall, subject to compliance with the applicable procedures
described herein (the "Applicable Procedures"), exchange or
cause the exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Note as
provided in this Section 2.06(a)(i). Upon receipt by the
Trustee of (1) instructions given in accordance with the
Applicable Procedures from an Agent Member directing the
Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal
to the beneficial interest in the Rule 144A Global Note to
be exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding
the participant account of the Depositary and the Euroclear
or Cedel account to be credited with such increase, and (3)
a certificate in the form of Exhibit B-1 hereto given by the
owner of such beneficial interest stating that the transfer
of such interest has been made in compliance with the
transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S, then the Trustee, as Registrar, shall instruct
the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable
Rule 144A Global Note and to increase or cause to be
increased the aggregate principal amount at maturity of the
applicable Regulation S Global Note by the principal amount
at maturity of the beneficial interest in the Rule 144A
Global Note to be exchanged, to credit or cause to be
credited to the account of the person specified in such
instructions a beneficial interest in the Regulation S
Global Note equal to the reduction in the aggregate
principal amount at maturity of the Rule 144A Global Note,
and to debit, or cause to be debited, from the account of
the person making such exchange or transfer the beneficial
interest in the Rule 144A Global Note that is being
exchanged or transferred.
(ii) Regulation S Global Note to Rule 144A Global Note. If, at
any time, an owner of a beneficial interest in a Regulation
S Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary wishes to transfer
its interest in such Regulation S Global Note to a person
who is required or permitted to take delivery thereof in the
form of an interest in a Rule 144A Global Note, such owner
shall, subject to the Applicable Procedures, exchange or
cause the exchange of such interest for an equivalent
beneficial interest in a Rule 144A Global Note as provided
in this Section 2.06(a)(ii). Upon receipt by the Trustee of
(1) instructions from Euroclear or Cedel, if applicable, and
the Depositary, directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in the
Rule 144A Global Note equal to the beneficial interest in
the Regulation S Global Note to be exchanged, such
instructions to contain information regarding the
participant account with the Depositary to be credited with
such increase, (2) a written order given in accordance with
the Applicable Procedures containing information regarding
the participant account of the Depositary and (3) if such
transfer is being effected prior to the expiration of the
"40 day restricted period" (as
-13-
<PAGE>
defined by Regulation S under the Securities Act), a
certificate in the form of Exhibit B-2 attached hereto given
by the owner of such beneficial interest stating (A) if the
transfer is pursuant to Rule 144A, that the person
transferring such interest in a Regulation S Global Note
reasonably believes that the person acquiring such interest
in a Rule 144A Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or
securities laws of any state of the United States, (B) that
the transfer complies with the requirements of Rule 144A
under the Securities Act and any applicable blue sky or
securities laws of any state of the United States or (C) if
the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the requirements of the
exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in
form reasonably acceptable to the Company and to the
Registrar, then the Trustee, as Registrar, shall instruct
the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Rule 144A Global Note by the principal amount at maturity of
the beneficial interest in the Regulation S Global Note to
be exchanged, and the Trustee, as Registrar, shall instruct
the Depositary, concurrently with such reduction, to credit
or cause to be credited to the account of the person
specified in such instructions a beneficial interest in the
applicable Rule 144A Global Note equal to the reduction in
the aggregate principal amount at maturity of such
Regulation S Global Note and to debit or cause to be debited
from the account of the person making such transfer the
beneficial interest in the Regulation S Global Note that is
being transferred.
(b) Transfer and Exchange of Certificated Convertible Notes. When
-------------------------------------------------------
certificated Convertible Notes are presented by a holder to the Registrar with a
request:
(x) to register the transfer of the Certificated Notes; or
(y) to exchange such certificated Convertible Notes for an equal
principal amount of certificated Convertible Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested;
provided, however, that the certificated Convertible Notes presented or
surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such holder or by his attorney,
duly authorized in writing; and
-14-
<PAGE>
(ii) in the case of a certificated Convertible Note that is
a Restricted Convertible Note, such request shall be
accompanied by the following additional information and
documents, as applicable:
(A) if such Restricted Convertible Note is being
delivered to the Registrar by a holder for
registration in the name of such holder, without
transfer, or such Restricted Convertible Note is
being transferred to the Company, no certification
is required;
(B) if such Restricted Convertible Note is being
transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance with Rule
144 under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that effect from
such holder (in substantially the form of Exhibit
B-3 hereto); or
(C) if such Restricted Convertible Note is being
transferred in reliance on any other exemption from
the registration requirements of the Securities
Act, a certification to that effect from such
holder (in substantially the form of Exhibit B-3
hereto) and an Opinion of Counsel from such holder
or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that
such transfer is in compliance with the Securities
Act.
(c) Transfer of a Beneficial Interest in a Rule 144A Global Note or
Regulation S Permanent Global Note for a certificated
Convertible Note.
(i) Any person having a beneficial interest in a Rule 144A
Global Note or Regulation S Permanent Global Note may
upon request, subject to the Applicable Procedures,
exchange such beneficial interest for a certificated
Convertible Note. Upon receipt by the Trustee of
written instructions or such other form of instructions
as is customary for the Depositary (or Euroclear or
Cedel, if applicable), from the Depositary or its
nominee on behalf of any person having a beneficial
interest in a Rule 144A Global Note or Regulation S
Permanent Global Note, and, in the case of a Restricted
Convertible Note, the following additional information
and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to
the person designated by the Depositary as being
the beneficial owner, a certification to that
effect from such person (in substantially the form
of Exhibit B-4 hereto);
(B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the
Securities Act or
-15-
<PAGE>
pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
the transferor (in substantially the form of Exhibit B-
4 hereto); or
(C) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit B-4 hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the
Securities Act,
in which case the Trustee or the custodian, at the direction
of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depositary
and the custodian, cause the aggregate principal amount of
Rule 144A Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced accordingly and,
following such reduction, the Company shall execute and, the
Trustee shall authenticate and deliver to the transferee a
certificated Convertible Note in the appropriate principal
amount.
(ii) Certificated Convertible Notes issued in exchange for a
beneficial interest in a Rule 144A Global Note or Regulation
S Permanent Global Note, as applicable, pursuant to this
Section 2.06(c) shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such certificated Convertible Notes to the persons
in whose names such Convertible Notes are so registered.
Following any such issuance of certificated Convertible
Notes, the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate
principal amount at maturity of the applicable Global Note
to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes.
-----------------------------------------------------
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06 or Section 2.10), a Global Note
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(e) Transfer and Exchange of a Certificated Convertible Note for a
--------------------------------------------------------------
Beneficial Interest in a Global Note. A certificated Convertible Note may not
- ------------------------------------
be transferred or exchanged for a beneficial interest in a Global Note.
-16-
<PAGE>
(f) Authentication of Certificated Convertible Note in Absence of
-------------------------------------------------------------
Depositary. If at any time:
- ----------
(i) the Depositary for the Convertible Notes notifies the
Company that the Depositary is unwilling or unable to
continue as Depositary for the Global Notes and a successor
Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated
Convertible Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, certificated Convertible Notes in an aggregate principal amount equal
to the principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Convertible Note certificate evidencing
certificated Convertible Notes (and all Convertible Notes
issued in exchange therefor or substitution thereof) shall
bear legends in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE THIRD ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY
PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
-17-
<PAGE>
SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN
HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY
PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION
S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE
TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT
IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER
THE SECURITIES ACT."
(ii) Upon any sale or transfer of a Restricted Convertible Note
(including any Restricted Convertible Note represented by a
Global Note) pursuant to Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act:
-18-
<PAGE>
(A) in the case of any Restricted Convertible Note that is
a certificated Convertible Note, the Registrar shall
permit the holder thereof to exchange such Restricted
Convertible Note for a certificated Convertible Note
that does not bear the legend set forth in (i) above
and rescind any restriction on the transfer of such
Restricted Convertible Note upon receipt of a
certification from the transferring holder
substantially in the form of Exhibit B-4 hereto; and
(B) in the case of any Restricted Convertible Note
represented by a Global Note, such Restricted
Convertible Note shall not be required to bear the
legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(a) and (b)
hereof; provided, however, that with respect to any
request for an exchange of a Restricted Convertible
Note that is represented by a Global Note for a
certificated Convertible Note that does not bear the
legend set forth in (i) above, which request is made in
reliance upon Rule 144 under the Securities Act, the
holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to
Rule 144 under the Securities Act (such certification
to be substantially in the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Restricted Convertible Note
(including any Restricted Convertible Note represented by a
Global Note) in reliance on any exemption from the
registration requirements of the Securities Act (other than
exemptions pursuant to Rule 144A or Rule 144 under the
Securities Act) in which the holder or the transferee
provides an Opinion of Counsel to the Company and the
Registrar in form and substance reasonably acceptable to the
Company and the Registrar (which Opinion of Counsel shall
also state that the transfer restrictions contained in the
legend are no longer applicable):
(A) in the case of any Restricted Convertible Note that is
a certificated Convertible Note, the Registrar shall
permit the holder thereof to exchange such Restricted
Convertible Note for a certificated Convertible Note
that does not bear the legend set forth in (i) above
and rescind any restriction on the transfer of such
Restricted Convertible Note; and
(B) in the case of any Restricted Convertible Note
represented by a Global Note, such Restricted
Convertible Note shall not be required to bear the
legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(a) and (b)
hereof.
(h) The Initial Purchaser shall not be required to deliver, and
neither the Company nor the Trustee shall demand therefrom, any of the
certifications or opinions described in this Section 2.06 in connection with the
initial issuance and delivery by the Company of the Convertible
-19-
<PAGE>
Notes on the effective date hereof or on the date of any settlement in
connection with the exercise of the over-allotment option granted to the Initial
Purchaser in the Purchase Agreement, including with respect to the issuance and
delivery of Convertible Notes that are Restricted Convertible Notes.
SECTION 2.07. Replacement Convertible Notes. If the holder of a
-----------------------------
Convertible Note claims that the Convertible Note has been lost, destroyed or
wrongfully taken or if such Convertible Note is mutilated and is surrendered to
the Trustee, the Company shall issue and the Trustee shall authenticate a
replacement Convertible Note if the Trustee's and the Company's requirements are
met. If required by the Trustee or the Company, an indemnity bond must be
sufficient in the judgment of both to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Convertible Note is replaced. The Company may charge for its expenses in
replacing a Convertible Note.
In case any such mutilated, destroyed, lost or stolen Convertible Note
has become or is about to become due and payable, or is about to be purchased by
the Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Convertible Note, pay or purchase such Convertible
Note, as the case may be.
Every replacement Convertible Note is an additional obligation of the
Company.
SECTION 2.08. Outstanding Convertible Notes. The Convertible Notes
-----------------------------
outstanding at any time are all the Convertible Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
and those described in this Section as not outstanding.
If a Convertible Note is replaced, paid or purchased pursuant to
Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives
proof satisfactory to it that the replaced, paid or purchased Convertible Note
is held by a bona fide purchaser.
If Convertible Notes are considered paid under Section 4.01 hereof,
they cease to be outstanding and interest on them ceases to accrue.
A Convertible Note does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Convertible Note.
SECTION 2.09. Treasury Convertible Notes. In determining whether the
--------------------------
Noteholders of the required principal amount of Convertible Notes have concurred
in any direction, waiver or consent, Convertible Notes owned by the Company or
an Affiliate of the Company shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Convertible Notes which a Trust Officer of the Trustee actually knows are so
owned shall be so disregarded.
SECTION 2.10. Temporary Convertible Notes; Exchange of Global Note
----------------------------------------------------
for Certificated Convertible Note.
- ---------------------------------
(a) Until definitive Convertible Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Convertible
Notes. Temporary Convertible Notes shall be substantially in the form of
definitive Convertible Notes but may have variations that the Company considers
appropriate for temporary Convertible Notes. On or prior to the date the
-20-
<PAGE>
Shelf Registration becomes effective, the Company shall prepare and the Trustee
shall authenticate definitive Convertible Notes in exchange for temporary
Convertible Notes.
(b) A Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.01 shall be transferred to
the beneficial owners thereof in the form of certificated Convertible Notes only
if such transfer complies with Section 2.06 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Note or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial owners
thereof in the form of certificated Convertible Notes pursuant to this Section
2.10 shall be surrendered by the Depositary to the Trustee at an office located
in The City of New York, to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate principal
amount at maturity of Convertible Notes of authorized denominations in the form
of certificated Convertible Notes. Any portion of a Global Note transferred
pursuant to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in such
names as the Depositary shall direct. Any Convertible Notes in the form of
certificated Convertible Notes delivered in exchange for an interest in the
Global Note shall, except as otherwise provided by Section 2.06(b), bear the
Restricted Convertible Notes Legend set forth in Exhibit A hereto.
(d) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Indenture or the Convertible Notes.
(e) In the event of the occurrence of either of the events specified
in Section 2.10(b), the Company will as soon as practicable make available to
the Trustee a reasonable supply of certificated Convertible Notes in definitive,
fully registered form without interest coupons.
SECTION 2.11. Cancellation. The Company at any time may deliver
------------
Convertible Notes to the Trustee for cancellation. The Registrar, Paying Agent
and Conversion Agent shall forward to the Trustee any Convertible Notes
surrendered to them for registration of transfer, redemption, conversion,
exchange or payment. The Trustee shall promptly cancel all Convertible Notes
surrendered for registration of transfer, redemption, conversion, exchange,
payment, replacement or cancellation and shall dispose of canceled Convertible
Notes as the Company directs. The Company may not issue new Convertible Notes to
replace Convertible Notes that it has paid or that have been delivered to the
Trustee for cancellation or that any holder has converted.
SECTION 2.12. Defaulted Interest. If the Company fails to make a
------------------
payment of interest on the Convertible Notes, it shall pay such defaulted
interest plus any interest payable on the defaulted interest, in any lawful
manner. It may pay such defaulted interest, plus any such interest payable on
it, to the persons who are Noteholders on a subsequent special record date. The
Company shall fix any such record date and payment date. At least 15 days
before any such record date, the Company shall mail to Noteholders a notice that
states the record date, payment date, and amount of such interest to be paid.
-21-
<PAGE>
ARTICLE III
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
------------------
Convertible Notes pursuant to the Optional Redemption provision of Section 3.07
hereof, it shall notify the Trustee of the redemption date and the principal
amount of Convertible Notes to be redeemed. The Company shall give such notice
to the Trustee of any event or determination that obligates the Trustee to take
any action or give any notice under this Article III not less than twenty
business days prior to the first day in any period of time specified for the
Trustee to take such action or give such notice (unless a shorter notice period
shall be satisfactory to the Trustee).
SECTION 3.02. Selection of Convertible Notes to be Redeemed. If less
---------------------------------------------
than all the Convertible Notes are to be redeemed, the Trustee shall select the
Convertible Notes to be redeemed (which selection shall include compliance with
the requirements of the principal national securities exchange, if any, on which
the Convertible Notes are listed), on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate. The Trustee shall make the
selection not more than 60 days and not less than 30 days before the redemption
date from Convertible Notes outstanding not previously called for redemption.
The Trustee may select for redemption portions of the principal of Convertible
Notes that have denominations larger than $1,000. Convertible Notes and
portions of them it selects shall be in amounts of $1,000 or integral multiples
of $1,000. Provisions of this Indenture that apply to Convertible Notes called
for redemption also apply to portions of Convertible Notes called for
redemption. The Trustee shall notify the Company promptly of the Convertible
Notes or portions of Convertible Notes to be called for redemption.
If any Convertible Note selected for partial redemption is converted
in part after such selection, the converted portion of such Convertible Note
shall be deemed (so far as may be) to be the portion to be selected for
redemption. The Convertible Notes (or portions thereof) so selected shall be
deemed duly selected for redemption for all purposes hereof, notwithstanding
that any such Convertible Note is converted in whole or in part before the
mailing of the notice of redemption. Upon any redemption of less than all the
Convertible Notes, the Company and the Trustee may treat as outstanding any
Convertible Notes surrendered for conversion during the period 15 days next
preceding the mailing of a notice of redemption and need not treat as
outstanding any Convertible Note authenticated and delivered during such period
in exchange for the unconverted portion of any Convertible Note converted in
part during such period.
SECTION 3.03. Notice of Redemption. At least 20 days but not more than
---------------------
60 days before a redemption date, the Company shall mail a notice of redemption
to each holder (other than DTC or any nominee thereof, who shall receive notice
from the Company at least 30 days before a redemption date) whose Convertible
Notes are to be redeemed at such holder's registered address.
The notice shall identify the Convertible Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
-22-
<PAGE>
(c) if any Convertible Note is being redeemed in part, the portion of
the principal amount of such Convertible Note to be redeemed and that,
after the redemption date, upon cancellation of such Convertible Note, a
new Convertible Note or Convertible Notes in principal amount equal to the
unredeemed portion will be issued in the name of the holder thereof;
(d) the name and address of the Paying Agent;
(e) that Convertible Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price plus accrued interest;
(f) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Convertible Notes called for
redemption ceases to accrue on and after the redemption date; and
(g) the paragraph of the Convertible Notes pursuant to which the
Convertible Notes called for redemption are being redeemed.
Such notice shall also state the current Conversion Price and the date
on which the right to convert such Convertible Notes or portions thereof into
Common Stock of the Company will expire.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed in accordance with Section 3.03, Convertible Notes called
for redemption become due and payable on the redemption date at the redemption
price set forth in the Convertible Notes, including accrued and unpaid interest
up to but not including the redemption date. Upon surrender to the Trustee or
Paying Agent, such Convertible Notes called for redemption shall be paid at the
redemption price in the Convertible Notes, including interest, if any, accrued
and unpaid on the redemption date; provided that if the redemption date is after
--------
a regular record date and on or prior to the interest payment date relating to
such regular record date, the accrued interest shall be payable to the Holder of
the redeemed Convertible Notes registered on the relevant record date; and
provided, further, that if a redemption date is a Legal Holiday, payment shall
- -------- -------
be made on the next succeeding Business Day and no interest shall accrue for the
period from such redemption date to such succeeding Business Day.
SECTION 3.05. Deposit of Redemption Price. On or before 2:00 p.m.,
---------------------------
New York City time, of the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest up to but not including the redemption date on all
Convertible Notes to be redeemed on that date unless theretofore converted into
Common Stock pursuant to the provisions hereof. The Trustee or the Paying Agent
shall return to the Company any money not required for that purpose.
If the Company complies with the preceding paragraph and the other
provision of this Article Three and payment of the Convertible Notes called for
redemption is not otherwise prohibited hereunder, interest on the Convertible
Notes to be redeemed will cease to accrue on the
-23-
<PAGE>
applicable redemption date, whether or not such Convertible Notes are presented
for payment. Notwithstanding anything herein to the contrary, if any Security
surrendered for redemption in the manner provided in the Convertible Notes shall
not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall continue to
accrue and be paid from and including the redemption date until such payment is
made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.01 hereof and in the Convertible Notes.
SECTION 3.06. Convertible Notes Redeemed in Part. Upon cancellation
----------------------------------
of a Convertible Note that is redeemed in part, the Company shall issue and the
Trustee shall authenticate for the holder at the expense of the Company a new
Convertible Note equal in principal amount to the unredeemed portion of the
Convertible Note surrendered.
SECTION 3.07. Optional Redemption. The Company may redeem all or any
-------------------
portion of the Convertible Notes, upon the terms and at the redemption prices
set forth in each of the Convertible Notes. Any redemption pursuant to this
Section 3.07 shall be made pursuant to the provisions of Section 3.01 through
3.06 hereof.
-24-
<PAGE>
SECTION 3.08. Designated Event Offer.
----------------------
(a) In the event that, pursuant to Section 4.07 hereof, the Company
shall commence a Designated Event Offer, the Company shall follow the procedures
in this Section 3.08.
(b) The Designated Event Offer shall remain open for a period
specified by the Company which shall be no less than 20 Business Days and no
more than 40 Business Days following its commencement on the date of the mailing
of notice in accordance with Section 4.07(b) hereof (the "Commencement Date"),
except to the extent that a longer period is required by applicable law (the
"Tender Period"). Upon the expiration of the Tender Period (the "Designated
Event Payment Date"), the Company shall purchase the principal amount of
Convertible Notes required to be purchased pursuant to Section 4.07 hereof (the
"Offer Amount").
(c) If the Designated Event Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest will be paid to the person in whose name a Convertible Note is
registered at the close of business on such record date, and no additional
interest will be payable to Noteholders who tender Convertible Notes pursuant to
the Designated Event Offer.
(d) The Company shall provide the Trustee with notice of the
Designated Event Offer at least 10 calendar days before the Commencement Date.
(e) On or before the Commencement Date, the Company or the Trustee
(at the expense of the Company) shall send, by first class mail, a notice to
each of the Noteholders, which shall govern the terms of the Designated Event
Offer and shall state:
(i) that the Designated Event Offer is being made pursuant to this
Section 3.08 and Section 4.07 hereof and that all Convertible Notes
tendered will be accepted for payment;
(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.07 hereof), the length of time the Designated Event Offer
will remain open and the Designated Event Payment Date;
(ii) that any Convertible Note or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the
Designated Event Payment, any Convertible Note or portion thereof accepted
for payment pursuant to the Designated Event Offer shall cease to accrue
interest after the Designated Event Payment Date;
(v) that Noteholders electing to have a Convertible Note or portion
thereof purchased pursuant to any Designated Event offer will be required
to surrender the Convertible Note, with the form entitled "Option of
Noteholder To Elect Purchase" on the reverse of the Convertible Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day preceding the Designated
Event Payment Date;
-25-
<PAGE>
(vi) that Noteholders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Designated Event Payment Date, or such
longer period as may be required by law, a letter or a telegram, telex or
facsimile transmission (receipt of which is confirmed and promptly followed
by a letter) setting forth the name of the Noteholder, the principal amount
of the Convertible Note or portion thereof the Noteholder delivered for
purchase and a statement that such Noteholder is withdrawing his election
to have the Convertible Note or portion thereof purchased; and
(vii) that Noteholders whose Convertible Notes are being purchased
only in part will be issued new Convertible Notes equal in principal amount
to the unpurchased portion of the Convertible Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof.
In addition, the notice shall contain all instructions and materials
that the Company shall reasonably deem necessary to enable such Noteholders to
tender Convertible Notes pursuant to the Designated Event Offer.
(f) At least one Business Day prior to the Designated Event Payment
Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent
in immediately available funds an amount equal to the Offer Amount to be held
for payment in accordance with the terms of this Section 3.08. On the Designated
Event Payment Date, the Company shall, to the extent lawful, (i) accept for
payment the Convertible Notes or portions thereof tendered pursuant to the
Designated Event Offer, (ii) deliver or cause to be delivered to the Trustee
Convertible Notes so accepted and (iii) deliver to the Trustee an Officers'
Certificate stating such Convertible Notes or portions thereof have been
accepted for payment by the Company in accordance with the terms of this Section
3.08. The Paying Agent shall promptly (but in any case not later than ten (10)
calendar days after the Designated Event Payment Date) mail or deliver to each
tendering Noteholder an amount equal to the purchase price of the Convertible
Notes tendered by such Noteholder, and the Trustee shall promptly authenticate
and mail or deliver to such Noteholders a new Convertible Note equal in
principal amount to any unpurchased portion of the Convertible Note surrendered,
if any; provided, that each new Convertible Note shall be in a principal amount
--------
of $1,000 or an integral multiple thereof. Any Convertible Notes not so
accepted shall be promptly mailed or delivered by or on behalf of the Company to
the holder thereof. The Company will publicly announce the results of the
Designated Event Offer on, or as soon as practicable after, the Designated Event
Payment Date.
(g) The Designated Event Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include all
instructions and materials that the Company shall reasonably deem necessary to
enable such Noteholders to tender their Convertible Notes.
ARTICLE IV
Covenants
---------
SECTION 4.01. Payment of Convertible Notes. The Company shall pay the
----------------------------
principal of and interest on the Convertible Notes on the dates and in the
manner provided in the Convertible Notes. Principal and interest shall be
considered paid on the date due if the Paying Agent (other than the Company or
an Affiliate of the Company) holds on that date money designated for and
sufficient
-26-
<PAGE>
to pay all principal and interest then due and such Paying Agent is not
prohibited from paying such money to the Noteholders on that date pursuant to
the terms of this Indenture. To the extent lawful, the Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the rate borne by the Convertible Notes, compounded
semiannually.
If the Paying Agent pays out any amount due under the terms of the
Convertible Notes on or after the due date therefor on the assumption that the
corresponding payment for such amount has been or will be made by the Company
and such payment has in fact not been so made by the Company prior to the time
that the Paying Agent makes such payment, then the Company shall on demand
reimburse the Paying Agent for the relevant amount, and pay interest to the
Paying Agent on such amount from the date on which it is paid out to the date of
reimbursement at a rate per annum equal to the cost to the Paying Agent of
funding the amount paid out, as certified by the Paying Agent and expressed as a
rate per annum.
SECTION 4.02. SEC Reports. Whether or not required by the rules and
-----------
regulations of the SEC, so long as any Convertible Notes are outstanding, the
Company will furnish to the Trustee and to the holders of Convertible Notes all
quarterly and annual financial information required to be contained in a filing
with the SEC on Forms 10-Q and 10-K, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
annual information only, a report thereon by the Company's certified independent
accountants.
SECTION 4.03. Compliance Certificate. The Company shall deliver to
----------------------
the Trustee, within 120 days after the end of each fiscal year of the Company,
an Officers' Certificate stating that a review of the activities of the Company
and its Subsidiaries, if any, during the preceding fiscal year has been made
under the supervision of the signing officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under,
and complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Company has kept, observed, performed and fulfilled
each and every covenant, and complied with the covenants and conditions
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he may have knowledge) and that to the best of his
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal or of interest, if any, on the Convertible
Notes are prohibited.
One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will, so long as any of the Convertible Notes are
outstanding, deliver to the Trustee, forthwith upon becoming aware of:
(a) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture; or
(b) any event of default under any other mortgage, indenture or
instrument which event of default would likely result in an Event of
Default under Section 8.01(e),
-27-
<PAGE>
an Officers' Certificate specifying such Default, Event of Default or default.
Immediately upon the occurrence of any event giving rise to additional
interest in respect of the Convertible Notes in accordance with Section 11
thereof or the termination of such additional interest, the Company shall give
the Trustee notice of such additional interest or termination thereof and of the
event giving rise to such additional interest or termination thereof (such
notice to be contained in an Officers' Certificate), and prior to receipt of
such Officers' Certificate the Trustee shall be entitled to assume that no such
additional interest is owing or that no termination thereof has occurred, as the
case may be.
SECTION 4.04. Stay, Extension and Usury Laws. The Company covenants
------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.05. Corporate Existence. Subject to Article VII hereof, the
-------------------
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate, partnership or
other existence of each Subsidiary of the Company in accordance with the
respective organizational documents of each Subsidiary and the rights (charter
and statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
- -------- -------
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors (as evidenced by a Board Resolution
certified by the Secretary of the Company) shall determine in good faith that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries taken as a whole and that the loss thereof
is not adverse in any material respect to the Noteholders. Notwithstanding the
foregoing, the corporate existence or ownership of any Subsidiary may be
terminated or changed in connection with any Board-approved corporate
restructuring or reorganization.
SECTION 4.06. Taxes. The Company shall, and shall cause each of its
-----
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.
-28-
<PAGE>
SECTION 4.07. Designated Event.
----------------
(a) Upon the occurrence of a Designated Event, each holder of
Convertible Notes shall have the right, in accordance with this Section 4.07 and
Section 3.08 hereof, to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such holder's Convertible Notes
pursuant to the terms of Section 3.08 (the "Designated Event Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest thereon to the Designated Event Payment Date (the "Designated
Event Payment").
(b) Within 30 days following any Designated Event, the Company shall
mail to each holder the notice provided by Section 3.08(e).
SECTION 4.08. Stockholders Rights Plan. The Company shall take any
------------------------
and all action with respect to the Stockholders Rights Plan required to provide
the holders of Common Stock issuable upon conversion of the Convertible Notes
with the rights and other benefits such holder would have received if such
holder's Common Stock were issued and outstanding on the date of the Indenture
up to and including the date of determination. In the event that the Company
implements a new stockholder rights plan, such rights plan shall provide that
upon conversion of the Convertible Notes the holders will receive, in addition
to the Common Stock issuable upon such conversion, the rights issued under such
rights plan (whether or not such rights have separated from the Common Stock at
the time of such conversion), provided that a holder of Convertible Notes and
the Common Stock issuable upon conversion thereof shall be subject to all of the
terms and conditions of any such rights plan.
ARTICLE V
Conversion
----------
SECTION 5.01. Conversion Privilege. A holder of a Convertible Note
--------------------
may convert the principal amount thereof (or any portion thereof that is an
integral multiple of $1,000) into fully paid and nonassessable shares of Common
Stock of the Company at any time after 90 days following the date of original
issuance thereof and prior to the close of business (New York City time) on the
date of the Convertible Note's maturity at the Conversion Price then in effect,
except that, with respect to any Convertible Note called for redemption, such
conversion right shall terminate at the close of business on the third Business
Day immediately preceding the redemption date (unless the Company shall default
in making the redemption payment when it becomes due, in which case the
conversion right shall terminate on the date such default is cured). The number
of shares of Common Stock issuable upon conversion of a Convertible Note is
determined by dividing the principal amount of the Convertible Note converted by
the conversion price in effect on the Conversion Date (the "Conversion Price").
The initial Conversion Price is stated in paragraph 10 of the
Convertible Notes and is subject to adjustment as provided in this Article V.
Provisions of this Indenture that apply to conversion of all of a
Convertible Note also apply to conversion of a portion of it. A holder of
Convertible Notes is not entitled to any rights of a holder of Common Stock
(other than as provided in Section 4.08 hereof) until such holder of Convertible
Notes has converted such Convertible Notes into Common Stock, and only to the
extent
-29-
<PAGE>
that such Convertible Notes are deemed to have been converted into Common Stock
under this Article V.
SECTION 5.02. Conversion Procedure. To convert a Convertible Note, a
--------------------
holder must satisfy the requirements in paragraph 10 of the Convertible Notes.
The date on which the holder satisfies all of those requirements is the
conversion date (the "Conversion Date"). As soon as practicable after the
Conversion Date, the Company shall deliver to the holder through the Conversion
Agent a certificate for the number of whole shares of Common Stock issuable upon
the conversion and a check for any fractional share determined pursuant to
Section 5.03. The person in whose name the certificate is registered shall
become the shareholder of record on the Conversion Date and, as of such date,
such person's rights as a Noteholder shall cease; provided, however, that no
-------- -------
surrender of a Convertible Note on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the person entitled to
receive the shares of Common Stock upon such conversion as the shareholder of
record of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the person entitled to receive such shares of Common
Stock as the shareholder of record thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open;
provided further, however, that such conversion shall be at the Conversion Price
- -------- ------- -------
in effect on the date that such Convertible Note shall have been surrendered for
conversion, as if the stock transfer books of the Company had not been closed.
No payment or adjustment will be made for accrued and unpaid interest
on a converted Convertible Note or for dividends or distributions on shares of
Common Stock issued upon conversion of a Convertible Note, but if any holder
surrenders a Convertible Note for conversion after the close of business on the
record date for the payment of an installment of interest and prior to the
opening of business on the next interest payment date, then, notwithstanding
such conversion, the interest payable on such interest payment date shall be
paid to the holder of such Convertible Note on such record date. In such event,
any such Convertible Note not called for redemption, when surrendered for
conversion, must be accompanied by payment in funds acceptable to the Company of
an amount equal to the interest payable on such interest payment date on the
portion so converted.
If a holder converts more than one Convertible Note at the same time,
the number of whole shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of Convertible Notes converted.
Upon surrender of a Convertible Note that is converted in part, the
Trustee shall authenticate for the holder a new Convertible Note equal in
principal amount to the unconverted portion of the Convertible Note surrendered.
SECTION 5.03. Fractional Shares. The Company will not issue
-----------------
fractional shares of Common Stock upon conversion of a Convertible Note. In
lieu thereof, the Company will pay an amount in cash based upon the Daily Market
Price of the Common Stock on the trading day prior to the date of conversion.
SECTION 5.04. Taxes on Conversion. The issuance of certificates for
-------------------
shares of Common Stock upon the conversion of any Convertible Note shall be made
without charge to the converting Noteholder for such certificates or for any tax
in respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may
-30-
<PAGE>
be directed by, the holder or holders of the converted Convertible Note;
provided, however, that in the event that certificates for shares of Common
- -------- -------
Stock are to be issued in a name other than the name of the holder of the
Convertible Note converted, such Convertible Note, when surrendered for
conversion, shall be accompanied by an instrument of transfer, in form
satisfactory to the Company, duly executed by the registered holder thereof or
his duly authorized attorney; and provided further, however, that the Company
-------- ------- -------
and Conversion Agent shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the holder of the converted
Convertible Note, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.
SECTION 5.05. Company to Provide Stock. The Company shall at all
------------------------
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of issuance upon
conversion of Convertible Notes as herein provided, a sufficient number of
shares of Common Stock to permit the conversion of all outstanding Convertible
Notes for shares of Common Stock.
All shares of Common Stock which may be issued upon conversion of the
Convertible Notes shall be duly authorized, validly issued, fully paid and
nonassessable when so issued.
Until such time as a Shelf Registration Statement becomes effective
with respect to shares of Common Stock issued upon conversion of the Convertible
Notes, any such shares of Common Stock shall be subject to the restrictions on
transfer, and may only be transferred or exchanged in accordance with
procedures, as are substantially consistent with the provisions of Section 2.06,
including, without limitation, with respect to certificated shares of such
Common Stock, the restrictive legend requirements of Section 2.06(g).
SECTION 5.06. Adjustment of Conversion Price. The Conversion Price
------------------------------
shall be subject to adjustment from time to time as follows:
(a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of Common
Stock to holders of Common Stock, (3) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of any Convertible Note thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock
which he would have owned immediately following such action had such Convertible
Notes been converted immediately prior thereto. Any adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date in
the case of a dividend, or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to
substantially all holders of Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of holders of
Common Stock entitled to receive such rights or warrants and expiring not more
than 45 days after such record date) to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the current market price
-31-
<PAGE>
(as determined pursuant to subsection (f) below) of the Common Stock on such
record date, the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on such record date, plus the
number of shares of Common Stock which the aggregate offering price of the
offered shares of Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after such
record date.
(c) In case the Company shall distribute to all holders of Common
Stock shares of any class of Capital Stock of the Company (other than Common
Stock), evidences of indebtedness or other assets (including securities, but
excluding those rights, warrants, dividends and distributions referred to in the
preceding clauses (a) and (b) and dividends and distributions in connection with
the liquidation, dissolution or winding up of the Company or paid exclusively
in cash out of current or retained earnings), or shall distribute to
substantially all holders of Common Stock rights or warrants to subscribe for
securities (other than those securities referred to in subsection (b) above),
then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the current market price (determined as provided in
subsection (f) below) of the Common Stock on the record date mentioned below
less the then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive evidence of such fair market value and
described in a Board Resolution) of the portion of the assets so distributed or
of such subscription rights or warrants applicable to one share of Common Stock,
and of which the denominator shall be such current market price of the Common
Stock. Such adjustment shall become effective immediately after the record date
for the determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to subscribe for additional shares of the
Company's Capital Stock (other than the Common Stock referred to in subsection
(b) above) ("Rights") pro rata to holders of Common Stock, the Company may, in
lieu of making any adjustment pursuant to this Section 5.06, make proper
provision so that each holder of a Convertible Note who converts such
Convertible Note (or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights to
which a holder of a number of shares of Common Stock equal to the number of
Conversion Shares is entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after the Distribution Date, the same number of Rights to
which a holder of the number of shares of Common Stock into which the principal
amount of the Convertible Note so converted was convertible immediately prior to
the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution
-32-
<PAGE>
requiring a Conversion Price adjustment pursuant to paragraph (c) of this
Section) in an aggregate amount that, together with the sum of (x) the aggregate
amount of any other distributions to all holders of its Common Stock made in
cash plus (y) all Excess Payments, in each case made within the 12 months
preceding the date fixed for determining the shareholders entitled to such
distribution (the "Distribution Record Date") and in respect of which no
Conversion Price adjustment pursuant to paragraphs (c) or (e) of this Section or
this paragraph (d) has been made, exceeds 15% of the product of the current
market price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the Distribution Record Date times the number of shares
of Common Stock outstanding on the Distribution Record Date (excluding shares
held in the treasury of the Company), the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying such Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this paragraph (d) by a fraction of which the
numerator shall be the current market price per share (determined as provided in
paragraph (f) of this Section) of the Common Stock on the Distribution Record
Date less the amount of such cash and other consideration (including any Excess
Payments) so distributed applicable to one share (based on the pro rata portion
of the aggregate amount of such cash and other consideration (including any
Excess Payments), divided by the shares of Common Stock outstanding on the
Distribution Record Date) of Common Stock and the denominator shall be such
current market price per share (determined as provided in paragraph (f) of this
Section) of the Common Stock on the Distribution Record Date, such reduction to
become effective immediately prior to the opening of business on the day
following the Distribution Record Date.
(e) In case a tender offer or other negotiated transaction made by the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of such
tender offer or other negotiated transaction and the amount of such Excess
Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (specifically including distributions of cash out
of retained earnings), in each case made within the 12 months preceding the date
of payment of such current negotiated transaction consideration or expiration of
such current tender offer, as the case may be (the "Purchase Date"), and as to
which no adjustment pursuant to paragraph (c) or paragraph (d) of this Section
or this paragraph (e) has been made, exceeds 15% of the product of the current
market price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the Purchase Date times the number of shares of Common
Stock outstanding (including any tendered shares but excluding any shares held
in the treasury of the Company) on the Purchase Date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be the current market price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions, if
any, applicable to one share (based on the pro rata portion of the aggregate
amount of such Excess Payments and such cash distributions, divided by the
shares of Common Stock outstanding on the Purchase Date) of Common Stock and the
denominator shall be such current market price per share (determined as provided
in paragraph (f) of this Section) of the Common Stock on the Purchase Date, such
reduction to become effective immediately prior to the opening of business on
the day following the Purchase Date.
(f) The current market price per share of Common Stock on any date
shall be deemed to be the average of the Daily Market Prices for the shorter of
(i) 30 consecutive Business
-33-
<PAGE>
Days ending on the last full trading day on the exchange or market referred to
in determining such Daily Market Prices prior to the time of determination or
(ii) the period commencing on the date next succeeding the first public
announcement of the issuance of such rights or such warrants or such other
distribution or such negotiated transaction through such last full trading day
on the exchange or market referred to in determining such Daily Market Prices
prior to the time of determination.
(g) In any case in which this Section 5.06 shall require that an
adjustment be made immediately following a record date for an event, the Company
may elect to defer, until such event, issuing to the holder of any Convertible
Note converted after such record date the shares of Common Stock and other
Capital Stock of the Company issuable upon such conversion over and above the
shares of Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Company shall
issue or cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.
SECTION 5.07. No Adjustment. No adjustment in the Conversion Price
-------------
shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
-------- -------
by reason of this Section 5.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article V shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. No adjustment need be made for rights
to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par value
or no par value of the Common Stock.
SECTION 5.08. Other Adjustments. (a) In the event that, as a result of
-----------------
an adjustment made pursuant to Section 5.06 above, the holder of any Convertible
Note thereafter surrendered for conversion shall become entitled to receive any
shares of Capital Stock of the Company other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any Convertible Notes shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in this Article V.
(b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.06(b)
and Section 5.06(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.
SECTION 5.09. Adjustments for Tax Purposes. The Company may, at its
----------------------------
option, make such reductions in the Conversion Price, in addition to those
required by Section 5.06 above, as it determines to be advisable in order that
any stock dividend, subdivision of shares, distribution of rights to purchase
stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its shareholders will not be
taxable to the recipients thereof.
SECTION 5.10. Adjustments by the Company. The Company from time to
--------------------------
time may, to the extent permitted by law, reduce the Conversion Price by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such reduction in accordance with Section 5.11, if
the Board of Directors has made a determination that such reduction would be in
the best interests of the Company, which determination shall be conclusive.
-34-
<PAGE>
SECTION 5.11. Notice of Adjustment. Whenever the Conversion Price is
--------------------
adjusted, the Company shall promptly mail to Noteholders at the addresses
appearing on the Registrar's books and the Conversion Agent a notice of the
adjustment and file with the Trustee an Officers Certificate briefly stating the
facts requiring the adjustment and the manner of computing it. The certificate
shall be conclusive evidence of the correctness of such adjustment.
SECTION 5.12. Notice of Certain Transactions. In the event that:
------------------------------
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.13; or
(3) there is a dissolution or liquidation of the Company;
a holder of a Convertible Note may wish to convert such Convertible Note into
shares of Common Stock prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Company shall mail to Noteholders at the addresses appearing on the
Registrar's books and the Conversion Agent and the Trustee a notice stating the
proposed record or effective date, as the case may be. The Company shall mail
the notice on or about the time notice is mailed to the shareholders of the
Company regarding such transaction or, if no notice is being mailed to the
shareholders of the Company, at least 10 days before the proposed record date or
effective date, as the case may be, regarding such transaction; however, failure
to mail such notice or any defect therein shall not affect the validity of any
transaction referred to in clause (1), (2) or (3) of this Section 5.12.
SECTION 5.13. Effect of Reclassifications, Consolidations, Mergers or
-------------------------------------------------------
Sales on Conversion Privilege. If any of the following shall occur, namely: (i)
- -----------------------------
any reclassification or change of outstanding shares of Common Stock issuable
upon conversion of Convertible Notes (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger to which the
Company is a party other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par value,
or from no par value to par value or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Company as an entirety, then the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture in form satisfactory to the
Trustee providing that the holder of each Convertible Note then outstanding
shall have the right to convert such Convertible Note into the kind and amount
of shares of stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock deliverable upon conversion of
such Convertible Note immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such supplemental indenture shall
provide for adjustments of the Conversion Price which shall be as nearly
equivalent as may be practicable to the adjustments of the Conversion Price
provided for in this Article V. The foregoing, however, shall not in any way
affect the right a holder of a Convertible Note may
-35-
<PAGE>
otherwise have, pursuant to clause (ii) of the last sentence of subsection (c)
of Section 5.06, to receive Rights upon conversion of a Convertible Note. If, in
the case of any such consolidation, merger, sale or conveyance, the stock or
other securities and property (including cash) receivable thereupon by a holder
of Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the
Convertible Notes as the Board of Directors of the Company shall reasonably
consider necessary by reason of the foregoing. The provision of this Section
5.13 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.13, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Convertible Notes upon the conversion of their Convertible
Notes after any such reclassification, change, consolidation, merger, sale or
conveyance and any adjustment to be made with respect thereto.
SECTION 5.14. Trustee's Disclaimer. The Trustee has no duty to
--------------------
determine when an adjustment under this Article V should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of the correctness of any such adjustment, and shall be protected in relying
upon the Officers' Certificate with respect thereto which the Company is
obligated to file with the Trustee pursuant to Section 5.11. The Trustee makes
no representation as to the validity or value of any securities or assets issued
upon conversion of Convertible Notes, and the Trustee shall not be responsible
for the Company's failure to comply with any provisions of this Article V.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.13, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.
-36-
<PAGE>
ARTICLE VI
Subordination
-------------
SECTION 6.01. Agreement to Subordinate. The Company, for itself and
------------------------
its successors, and each Noteholder, by his acceptance of Convertible Notes,
agree that the payment of the principal of or interest on or any other amounts
due on the Convertible Notes is subordinated in right of payment, to the extent
and in the manner stated in this Article VI, to the prior payment in full of all
existing and future Senior Debt.
SECTION 6.02. No Payment on Convertible Notes if Senior Debt in
-------------------------------------------------
Default. Anything in this Indenture to the contrary notwithstanding, no payment
- -------
on account of principal of or redemption of, interest on or other amounts due on
the Convertible Notes (including the making of a deposit pursuant to Section
8.01), and no redemption, purchase, or other acquisition of the Convertible
Notes, shall be made by or on behalf of the Company (i) unless full payment of
amounts then due for principal and interest and of all other amounts then due on
all Senior Debt has been made or duly provided for pursuant to the terms of the
instrument governing such Senior Debt, (ii) if, at the time of such payment,
redemption, purchase or other acquisition, or immediately after giving effect
thereto, there shall exist under any Senior Debt, or any agreement pursuant to
which any Senior Debt is issued, any default, which default shall not have been
cured or waived and which default shall have resulted in the full amount of such
Senior Debt being declared due and payable or (iii) if, at the time of such
payment, redemption, purchase or other acquisition, the Trustee shall have
received written notice from the Representative of the holders of Designated
Senior Debt (a "Payment Blockage Notice") that there exists under such
Designated Senior Debt, or any agreement pursuant to which such Designated
Senior Debt is issued, any default, which default shall not have been cured or
waived, permitting the holders thereof to declare any amounts of such Designated
Senior Debt due and payable, but only for the period (the "Payment Blockage
Period") commencing on the date of receipt of the Payment Blockage Notice and
ending (unless earlier terminated by notice given to the Trustee by the
Representative of the holders of such Designated Senior Debt) on the earlier of
(a) the date on which such event of default shall have been cured or waived or
(b) 179 days from the receipt of the Payment Blockage Notice (unless the event
of default relates to the failure to pay when due, the principal, premium, if
any or interest on such Designated Senior Debt). Notwithstanding the provisions
described in the immediately preceding sentence (other than in clauses (i) and
(ii)), unless the holders of such Designated Senior Debt or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Debt (unless the event of default relates to the failure to pay when due, the
principal, premium, if any or interest on such Designated Senior Debt), the
Company may resume payments on the Convertible Notes after the end of such
Payment Blockage Period. Not more than one Payment Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of defaults with
respect to Senior Debt during such period.
In the event that, notwithstanding the provisions of this Section
6.02, payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the Representative of the holders of
Senior Debt or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary
-37-
<PAGE>
to pay all Senior Debt in full in accordance with the terms of such Senior Debt,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
The Company shall give prompt written notice to the Trustee and any
Paying Agent of any event of default (after any applicable cure period has
expired) under any Senior Debt or under any agreement pursuant to which any
Senior Debt may have been issued.
SECTION 6.03. Distribution on Acceleration of Convertible Notes;
--------------------------------------------------
Dissolution and Reorganization; Subrogation of Convertible Notes.
- ----------------------------------------------------------------
(a) If the Convertible Notes are declared due and payable because of
the occurrence of an Event of Default, the Company shall give prompt written
notice to the holders of all Senior Debt or to the trustee(s) for such Senior
Debt of such acceleration. The Company may not pay the principal of or interest
on or any other amounts due on the Convertible Notes until five days after such
holders or trustee(s) of Senior Debt receive such notice and, thereafter, the
Company may pay the principal of or interest on or any other amounts due on the
Convertible Notes only if the provisions of this Article VI permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the
Convertible Notes because of an Event of Default or (ii) any distribution of
assets of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
dissolution, winding up, liquidation or reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest thereon and
any other amounts due thereon before the holders are entitled to receive
payment on account of the principal of or interest on or any other amounts
due on the Convertible Notes;
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of reorganization
or readjustment the payment of which is subordinate, at least to the extent
provided in this Article with respect to the Convertible Notes, to the
payment in full without diminution or modification by such plan of all
Senior Debt), to which the holders or the Trustee would be entitled except
for the provisions of this Article, shall be paid by the liquidating
trustee or agent or other person making such a payment or distribution,
directly to the holders of Senior Debt (or their representatives(s) or
trustee(s) acting on their behalf), ratably according to the aggregate
amounts remaining unpaid on account of the principal of or interest on and
other amounts due on the Senior Debt held or represented by each, to the
extent necessary to make payment in full of all Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether
in cash, property or securities (other than securities of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in this
-38-
<PAGE>
Article with respect to the Convertible Notes, to the payment in full
without diminution or modification by such plan of Senior Debt), shall be
received by the Trustee or the holders before all Senior Debt is paid in
full, such payment or distribution shall be held in trust for the benefit
of, and be paid over to upon request by a holder of the Senior Debt, the
holders of the Senior Debt remaining unpaid (or their representatives) or
trustee(s) acting on their behalf, ratably as aforesaid, for application to
the payment of such Senior Debt until all such Senior Debt shall have been
paid in full, after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the holders shall
be subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of and interest on the Convertible Notes shall
be paid in full and, for purposes of such subrogation, no such payments or
distributions to the holders of Senior Debt of cash, property or securities
which otherwise would have been payable or distributable to holders shall, as
between the Company, its creditors other than the holders of Senior Debt, and
the holders, be deemed to be a payment by the Company to or on account of the
Senior Debt, it being understood that the provisions of this Article are and are
intended solely for the purpose of defining the relative rights of the holders,
on the one hand, and the holders of Senior Debt, on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in
the Convertible Notes is intended to or shall (i) impair, as between the Company
and its creditors other than the holders of Senior Debt, the obligation of the
Company, which is absolute and unconditional, to pay to the holders the
principal of and interest on the Convertible Notes as and when the same shall
become due and payable in accordance with the terms of the Convertible Notes,
(ii) affect the relative rights of the holders and creditors of the Company
other than holders of Senior Debt or, as between the Company and the Trustee,
the obligations of the Company to the Trustee, or (iii) prevent the Trustee or
the holders from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Debt in respect of cash, property and
securities of the Company received upon the exercise of any such remedy.
Upon distribution of assets of the Company referred to in this
Article, the Trustee, subject to the provisions of Section 9.01 hereof, and the
holders shall be entitled to rely upon a certificate of the liquidating trustee
or agent or other person making any distribution to the Trustee or to the
holders for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing contained in this Article or elsewhere in this
Indenture, or in any of the Convertible Notes, shall prevent the good faith
application by the Trustee of any moneys which were deposited with it hereunder,
prior to its receipt of written notice of facts which would prohibit such
application, for the purpose of the payment of or on account of the principal of
or interest on, the Convertible Notes unless, prior to the date on which such
application is made by the Trustee, the Trustee shall be charged with actual
notice under Section 6.03(d) hereof of the facts which would prohibit the making
of such application.
(c) The provisions of this Article shall not be applicable to any
cash, properties or securities received by the Trustee or by any holder when
received as a holder of Senior Debt and
-39-
<PAGE>
nothing in Section 9.11 hereof or elsewhere in this Indenture shall deprive the
Trustee or such holder of any of its rights as such holder.
(d) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Convertible Notes pursuant to the
provisions of this Article. The Trustee, subject to the provisions of Section
9.01 hereof, shall be entitled to assume that no such fact exists unless the
Company or any holder of Senior Debt or any trustee therefor has given written
notice thereof to the Trustee. Notwithstanding the provisions of this Article
or any other provisions of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any fact which would prohibit the making of any
payment of moneys to or by the Trustee in respect of the Convertible Notes
pursuant to the provisions in this Article, unless, and until three Business
Days after the Trustee shall have received written notice thereof from the
Company or any holder or holders of Senior Debt or from any trustee therefor;
and, prior to the receipt of any such written notice, the Trustee, subject to
the provisions of Section 9.01 hereof, shall be entitled in all respects
conclusively to assume that no such facts exist; provided that if on a date not
--------
less than three Business Days immediately preceding the date upon which, by the
terms hereof, any such moneys may become payable for any purpose (including,
without limitation, the principal of or interest on any Convertible Note), the
Trustee shall not have received with respect to such moneys the written notice
provided for in this Section 6.03(d), then anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such moneys and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.
The Trustee shall be entitled to conclusively rely on the delivery to it of
a written notice by a person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a trustee on behalf of any such holder or
holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment; nor shall the Trustee be charged
with knowledge of the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Convertible Notes shall have ceased to exist,
unless and until the Trustee shall have received written notice to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee
shall (unless the context requires otherwise) also apply to any Paying Agent for
the Company.
SECTION 6.04. Reliance by Senior Debt on Subordination Provisions.
---------------------------------------------------
Each holder of any Convertible Note by his acceptance thereof acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration for each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the
Convertible Notes, to acquire and continue to hold, or to continue to hold, such
Senior Debt, and such holder of Senior Debt shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior
-40-
<PAGE>
Debt. Notice of any default in the payment of any Senior Debt, except as
expressly stated in this Article, and notice of acceptance of the provisions
hereof are hereby expressly waived. Except as otherwise expressly provided
herein, no waiver, forbearance or release by any holder of Senior Debt under
such Senior Debt or under this Article shall constitute a release of any of the
obligations or liabilities of the Trustee or holders of the Convertible Notes
provided in this Article.
SECTION 6.05. No Waiver of Subordination Provisions. Except as
-------------------------------------
otherwise expressly provided herein, no right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the holders of the Convertible Notes,
without incurring responsibility to the holders of the Convertible Notes and
without impairing or releasing the subordination provided in this Article VI or
the obligations hereunder of the holders of the Convertible Notes to the holders
of Senior Debt, do any one or more of the following: (i) change the manner,
place or terms of payment of, or renew or alter, Senior Debt, or otherwise amend
or supplement in any manner Senior Debt or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise dispose of any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any person liable in any manner for the
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company or any other person.
SECTION 6.06. Trustee's Relation to Senior Debt. The Trustee in its
---------------------------------
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations, as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not owe any fiduciary duty to the
holders of Senior Debt but shall have only such obligations to such holders as
are expressly set forth in this Article.
Each holder of a Convertible Note by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding up or liquidation or
reorganization under any applicable bankruptcy law of the Company (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of such holder's Convertible Notes in
the form required in such proceedings and the causing of such claim to be
approved. If the Trustee does not file a claim or proof of debt in the form
required in such proceedings prior to 30 days before the expiration of the time
to file such claims or proofs, then any holder or holders of Senior Debt or
their representative or representatives shall have the right to demand, sue for,
collect, receive and receipt for the payments and distributions in respect of
the Convertible Notes which are required to be paid or delivered to the holders
of Senior Debt as
-41-
<PAGE>
provided in this Article and to file and prove all claims therefor and to take
all such other action in the name of the holders or otherwise, as such holders
of Senior Debt or representative thereof may determine to be necessary or
appropriate for the enforcement of the provisions of this Article.
SECTION 6.07. Other Provisions Subject Hereto. Expect as expressly
-------------------------------
stated in this Article, notwithstanding anything contained in this Indenture to
the contrary, all the provisions of this Indenture and the Convertible Notes are
subject to the provisions of this Article. However, nothing in this Article
shall apply to or adversely affect the claims of, or payment to, the Trustee
pursuant to Section 9.07. Notwithstanding the foregoing, the failure to make a
payment on account of principal of or interest on the Convertible Notes by
reason of any provision of this Article VI shall not be construed as preventing
the occurrence of an Event of Default under Section 8.01.
ARTICLE VII
Successors
----------
SECTION 7.01. Merger, Consolidation or Sale of Assets. The Company
-------------------------------- ------
may not consolidate or merge with or into any person (whether or not the Company
is the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
unless:
(a) the Company is the surviving corporation or the entity or the
person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(b) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company) assumes all the
Obligations of the Company, pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee, under the Convertible Notes
and the Indenture;
(c) such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or
assets shall be as an entirety or virtually as an entirety to one person
and such person shall have assumed all the Obligations of the Company,
pursuant to a supplemental indenture in a form reasonably satisfactory to
the Trustee, under the Convertible Notes and the Indenture;
(d) immediately after such transaction no Default or Event of Default
exists; and
(e) the Company or such person shall have delivered to the Trustee an
Officers', Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture comply with the Indenture and
that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
SECTION 7.02. Successor Corporation Substituted. Upon any
---------------------------------
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 7.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which
-42-
<PAGE>
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
person has been named as the Company herein; provided, however, that the
-------- --------
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Convertible Notes.
ARTICLE VIII
Defaults and Remedies
---------------------
SECTION 8.01. Events of Default. An "Event of Default" occurs if:
-----------------
(a) the Company defaults in the payment of interest on any Convertible
Note when the same becomes due and payable, whether or not such payments
shall be prohibited by Article VI, and the Default continues for a period
of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of any
Convertible Note when the same becomes due and payable at maturity, upon
redemption or otherwise, whether or not such payment shall be prohibited by
Article VI;
(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.07 hereof, whether or not such purchase shall be
prohibited by Article VI;
(d) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Convertible Notes, required by
it to be performed and the Default continues for a period of 60 days after
the receipt of written notice from the Trustee to the Company or from the
holders of 25% in aggregate principal amount of the then outstanding
Convertible Notes to the Company and the Trustee stating that such notice
is a "Notice of Default";
(e) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
Material Subsidiary of the Company (or the payment of which is guaranteed
by the Company or any Material Subsidiary of the Company), whether such
Indebtedness or guarantee now exists or is created after the Issuance Date,
which default (i) is caused by a failure to pay when due principal of or
interest on such Indebtedness within the grace period provided for in such
Indebtedness (which failure continues beyond any applicable grace period)
(a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there is a Payment Default or the
maturity of which has been so accelerated, aggregates $5,000,000 or more;
(f) a final, non-appealable judgment or final, non-appealable
judgments (other than any judgment as to which a reputable insurance
company has accepted full liability) for the payment of money are entered
by a court or courts of competent jurisdiction against the
-43-
<PAGE>
Company or any Material Subsidiary of the Company and remain undischarged
for a (during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such judgments exceeds $5,000,000;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary
case in which it is the debtor, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (iv) makes
a general assignment for the benefit of its creditors, or (v) makes the
admission in writing that it generally is unable to pay its debts as the
same become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Material Subsidiary of the Company in an involuntary case, (ii) appoints a
Custodian of the Company or any Material Subsidiary of the Company or for
all or substantially all of its property, and the order or decree remains
unstayed and in effect for 60 days, or (iii) orders the liquidation of the
Company or any Material Subsidiary of the Company, and the order or decree
remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 8.02. Acceleration. If an Event of Default (other than an
------------
Event of Default specified in clauses (g) and (h) of Section 8.01 hereof) occurs
and is continuing, the Trustee by written notice to the Company, or the
Noteholders of at least 25% in principal amount of the then outstanding
Convertible Notes by notice to the Company and the Trustee, may declare all the
Convertible Notes to be due and payable. Upon such declaration, the principal
of, premium, if any, and accrued and unpaid interest on the Convertible Notes
shall be due and payable immediately. If an Event of Default specified in
clause (g) or (h) of Section 8.01 hereof occurs, such an amount shall ipso facto
---- -----
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Noteholder. The Noteholders of a majority in
aggregate principal amount of the then outstanding Convertible Notes by written
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration.
SECTION 8.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest on the Convertible Notes or to enforce the performance
of any provision of the Convertible Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Convertible Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
-44-
<PAGE>
SECTION 8.04. Waiver of Past Defaults. The Noteholders of a majority
-----------------------
in aggregate principal amount of the then outstanding Convertible Notes by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the payment of
the Designated Event Payment or the principal of, or interest on, any
Convertible Note. When a Default or Event of Default is waived, it is cured and
ceases; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 8.05. Control by Majority. The Noteholders of a majority in
-------------------
principal amount of the then outstanding Convertible Notes may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or would involve the
Trustee in personal liability.
SECTION 8.06. Limitation on Suits. A Noteholder may pursue a remedy
-------------------
with respect to this Indenture or the Convertible Notes only if:
(a) the Noteholder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Noteholders of at least 25% in principal amount of the then
outstanding Convertible Notes make a request to the Trustee to pursue the
remedy;
(c) such Noteholder or Noteholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes do not give the
Trustee a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 8.07. Rights of Noteholders to Receive Payment.
----------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Noteholder of a Convertible Note to receive payment of principal and interest on
the Convertible Note, on or after the respective due dates expressed in the
Convertible Note, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of the Noteholder made pursuant to this Section.
SECTION 8.08. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 8.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid on the
Convertible Notes and interest on overdue principal and interest and such
further amount as shall be sufficient to cover the costs and, to the extent
lawful, expenses of
-45-
<PAGE>
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 8.09. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, its creditors or its
property. Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the
Convertible Notes or the rights of any Noteholder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceeding.
SECTION 8.10. Priorities. If the Trustee collects any money pursuant
----------
to this Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
-----
Second: to the holders of Senior Debt to the extent required by
------
Article VI;
Third: to Noteholders for amounts due and unpaid on the Convertible
-----
Notes for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Convertible
Notes for principal and interest, respectively; and
Fourth: to the Company.
------
Except as otherwise provided in Section 2.12 hereof, the Trustee may
fix a record date and payment date for any payment to Noteholders made pursuant
to this Section.
SECTION 8.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 8.07 hereof, or a suit by
Noteholders of more than 10% in principal amount of the then outstanding
Convertible Notes.
ARTICLE IX
Trustee
-------
SECTION 9.01. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the
-46-
<PAGE>
absence of bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
8.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01. No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.02. Rights of Trustee. (a) The Trustee may rely on any
-----------------
document reasonably believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it (unless other
evidence be herein specifically prescribed) may require an Officers' Certificate
or an Opinion of Counsel, or both. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and nominees and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith, without negligence or wilful misconduct, and that
it reasonably believes to be authorized or within its rights or powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e) or (f) of Section 8.01 or of the identity
of any Material Subsidiary unless either (1) a Trust Officer assigned to its
Institutional Trust Administration shall have actual knowledge thereof, or (2)
the Trustee shall have received notice thereof in accordance with Section 12.02
hereof from the Company or any holder.
-47-
<PAGE>
SECTION 9.03. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Convertible
Notes and may otherwise deal with the Company or an Affiliate with the same
rights it would have if it were not Trustee. Any Agent may do the same with
like rights. However, the Trustee is subject to Sections 9.10 and 9.11 hereof.
SECTION 9.04. Trustee's Disclaimer. The Trustee makes no
--------------------
representation as to the validity or adequacy of this Indenture or the
Convertible Notes, it shall not be accountable for the Company's use of the
proceeds from any Convertible Notes authenticated and delivered by the Trustee
in conformity with the provisions of this Indenture, and it shall not be
responsible for any statement of the Company in the Indenture or any statement
in the Convertible Notes other than its authentication.
SECTION 9.05. Notice of Defaults. If a Default or Event of Default
------------------
occurs and is continuing and if it is actually known to the Trustee, the Trustee
shall mail to Noteholders a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Convertible Note, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 9.06. Reports by Trustee to Noteholders. Within 60 days after
---------------------------------
the reporting date stated in Section 12.10, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
TIA (S) 313(a) if and to the extent required by such (S) 313(a). The Trustee
also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Convertible Notes are
listed. The Company shall notify the Trustee when the Convertible Notes are
listed on any stock exchange.
SECTION 9.07. Compensation and Indemnity. The Company shall pay to
--------------------------
the Trustee from time to time reasonable compensation for its services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable and duly documented disbursements,
expenses and advances incurred or made by it including amounts payable to the
Paying Agent pursuant to the second paragraph of Section 4.01 hereunder. Such
disbursements and expenses may include the reasonable and duly documented
disbursements, compensation and expenses of the Trustee's agents and counsel but
shall not include amounts to be paid to any co-agents appointed by the Company.
The Company shall indemnify the Trustee and its officers, directors,
employees and all other agents against any loss or liability incurred by it
except as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable and duly documented
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
-48-
<PAGE>
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Convertible Notes on all money or
property held or collected by the Trustee, except money or property held in
trust to pay principal and interest on particular Convertible Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 9.07 shall survive the termination of
this Indenture, and removal or resignation of the Trustee, as provided by
Section 10.01 hereof.
SECTION 9.08. Replacement of Trustee. A resignation or removal of the
----------------------
Trustee and appointment of a Successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Noteholders
of a majority in principal amount of the then outstanding Convertible Notes may
remove the Trustee by so notifying the Trustee and the Company. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA (S) 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then outstanding
Convertible Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding
Convertible Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA (S) 310(b), any Noteholder
who has been a bona fide holder of a Convertible Note for at least six months
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, the
Company shall promptly pay all amounts due and payable to the retiring Trustee
pursuant to Section 9.07 hereof and the successor Trustee shall have all the
rights, powers
-49-
<PAGE>
and duties of the Trustee under this Indenture. The successor Trustee shall mail
a notice of its succession to Noteholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 9.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 9.08, the Company's obligations under Section
9.07 hereof shall continue for the benefit of the retiring trustee with respect
to expenses and liabilities incurred by it prior to such replacement.
SECTION 9.09. Successor Trustee by Merger, Etc. If the Trustee
--------------------------------
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 9.10. Eligibility; Disqualification. This Indenture shall
-----------------------------
always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1) and
(5). The Trustee shall always have a combined capital and surplus as stated in
Section 12.10 hereof. The Trustee is subject to TIA (S) 310(b).
SECTION 9.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed
in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject
to TIA (S) 311(a) to the extent indicated therein.
SECTION 9.12. Sections Applicable to Registrar, Paying Agent and
--------------------------------------------------
Conversion Agent. The term "Trustee" as used in Sections 9.01, 9.02, 9.03, 9.04
- -----------------
and 9.07 hereof shall (unless the context requires otherwise) be construed as
extending to and including the Trustee acting in its capacity, if any, as
Registrar, Paying Agent and Conversion Agent.
ARTICLE X
Discharge of Indenture
----------------------
SECTION 10.01. Termination of Company's Obligations. This Indenture
------------------------------------
shall cease to be of further effect (except that the Company's obligations under
Sections 9.07 and 10.02 hereof shall survive) when all outstanding Convertible
Notes theretofore authenticated and issued have been delivered to the Trustee
for cancellation and the Company has paid all sums payable hereunder.
Thereupon, the Trustee upon written request of the Company, shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture, except for those surviving obligations specified above.
SECTION 10.02. Repayment to Company. The Trustee and the Paying Agent
--------------------
shall promptly pay to the Company upon written request any excess money or
securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due; provided, however, that the Company shall have first caused
-------- -------
notice of such payment to the Company of such unclaimed money to be mailed to
each Noteholder entitled thereto no less than 30 days prior to such payment.
After payment to the Company, the Trustee and the Paying Agent shall have no
further liability with
-50-
<PAGE>
respect to such money and Noteholders entitled to the money must look to the
Company for payment as general creditors unless any applicable abandoned
property law designates another person.
ARTICLE XI
Amendments, Supplements and Waivers
-----------------------------------
SECTION 11.01. Without Consent of Noteholders. The Company and the
------------------------------
Trustee may amend or supplement this Indenture or the Convertible Notes without
the consent of any Noteholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.13 and 7.01 hereof;
(c) to provide for uncertificated Convertible Notes in addition to
certificated Convertible Notes;
(d) to make any change that does not adversely affect the legal rights
hereunder of any Noteholder;
(e) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA; or
(f) to make any change that provides any additional rights or benefits
to the holders of Convertible Notes or to reduce the Conversion Price.
An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.
SECTION 11.02. With Consent of Noteholders. Subject to Section 8.07
---------------------------
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Convertible Notes with the written consent (including consents obtained in
connection with any tender offer or exchange offer for Convertible Notes) of the
Noteholders of at least a majority in principal amount of the then outstanding
Convertible Notes. Subject to Sections 8.04 and 8.07 hereof, the Noteholders of
a majority in principal amount of the Convertible Notes then outstanding may
also by their written consent (including consents obtained in connection with
any tender offer or exchange offer for Convertible Notes) waive any existing
Default as provided in Section 8.04 or waive compliance in a particular instance
by the Company with any provision of this Indenture or the Convertible Notes.
However, without the consent of each Noteholder affected, an amendment,
supplement or waiver under this Section may not (with respect to any Convertible
Notes held by a nonconsenting Noteholder):
(a) reduce the amount of Convertible Notes whose Noteholders must
consent to an amendment, supplement or waiver;
-51-
<PAGE>
(b) reduce the rate of or change the time for payment of interest on
any Convertible Note;
(c) reduce the principal of or change the fixed maturity of any
Convertible Note or alter the redemption provisions with respect thereto;
(d) make any Convertible Note payable in money other than that stated
in the Convertible Note;
(e) make any change in Section 8.04, 8.07 or 11.02 hereof (this
sentence);
(f) waive a default in the payment of the Designated Event Payment or
the principal of, or interest on, any Convertible Note (other than as
provided in Section 8.04);
(g) waive a redemption payment payable on any Convertible Note;
(h) make any change that adversely affects the right of Noteholders to
convert Convertible Notes into Common Stock of the Company; or
(i) make any change in Articles V or VI hereof that adversely affects
the interests of the Noteholders.
To secure a consent of the Noteholders under this Section 11.02, it
shall not be necessary for the Noteholders to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of Convertible Notes or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Convertible Notes unless such consideration is offered
to be paid or agreed to be paid to all holders of the Convertible Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.
SECTION 11.03. Compliance with Trust Indenture Act. Every amendment
-----------------------------------
to this Indenture or the Convertible Notes shall be set forth in a supplemental
indenture that complies with the TIA as then in effect.
SECTION 11.04. Revocation and Effect of Consents. Until an amendment,
---------------------------------
supplement or waiver becomes effective, a consent to it by a Noteholder of a
Convertible Note is a continuing consent by the Noteholder and every subsequent
Noteholder of a Convertible Note or
-52-
<PAGE>
portion of a Convertible Note that evidences the same debt as the consenting
Noteholder's Convertible Note, even if notation of the consent is not made on
any Convertible Note. However, any such Noteholder or subsequent Noteholder may
revoke the consent as to such Noteholder's Convertible Note or portion of a
Convertible Note if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officer's Certificate certifying that the
Noteholders of the requisite principal amount of Convertible Notes have
consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Convertible Notes required hereunder for
such amendment or waiver to be effective shall have also been given and not
revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Noteholder, unless it is of the type described in any of clauses (a)
through (i) of Section 11.02 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every subsequent Noteholder
that evidences the same debt as the consenting Noteholder's Convertible Note.
SECTION 11.05. Notation on or Exchange of Convertible Notes. The
--------------------------------------------
Trustee may place an appropriate notation about an amendment or waiver on any
Convertible Note thereafter authenticated. The Company in exchange for all
Convertible Notes may issue and the Trustee shall authenticate new Convertible
Notes that reflect the amendment or waiver.
SECTION 11.06. Trustee Protected. The Trustee shall sign all
-----------------
supplemental indentures, except that the Trustee may, but need not, sign any
supplemental indenture that adversely affects its rights.
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.
SECTION 12.02. Notices. Any notice or communication by the Company or
-------
the Trustee to the other is duly given if in writing and delivered in person or
mailed by first-class mail to the other's address stated in Section 12.10
hereof. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
-53-
<PAGE>
Any notice or communication to a Noteholder shall be mailed by first-
class mail to his address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Noteholder or any defect in it shall not
affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 12.03. Communication by Noteholders with Other Noteholders.
---------------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other Noteholders
with respect to their rights under this Indenture or the Convertible Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S) 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.03) shall
include:
(a) a statement that the person signing such certificate or rendering
such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
-54-
<PAGE>
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents. The Trustee may make
---------------------------
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions in the State of New York are not
required to be open. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
If any other operative date for purposes of this Indenture shall occur on a
Legal Holiday then for all purposes the next succeeding day that is not a Legal
Holiday shall be such operative date.
SECTION 12.08. No Recourse Against Others. A director, officer,
--------------------------
employee or shareholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Convertible Notes or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Noteholder by accepting a Convertible Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Convertible Notes.
SECTION 12.09. Counterparts. This Indenture may be executed in any
------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 12.10. Variable Provisions. "Officer" means the Chairman, the
-------------------
President, any Vice-President, the Treasurer, the Secretary, any Assistant
Treasurer or any Assistant Secretary of the Company.
The Company initially appoints the Trustee as Paying Agent, Registrar,
Conversion Agent and authenticating agent and the Trustee hereby accepts such
appointments.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ending on December 31, 1996.
The reporting date for Section 9.06 hereof is May 1 of each year. The
first reporting date is May 1, 1997.
The Trustee shall always have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is: Stillwater Mining Company
HC 54
Box 365
Nye, Montana 59061
Telephone number: (406) 328-8500
Telefax number: (406) 328-8506
-55-
<PAGE>
The Trustee's address is: Colorado National Bank
950 Seventeenth Street, Suite 2450
Denver, Colorado 80202
Attention: Colleen Carwin
Telephone number: (303) 585-4549
Telefax number: (303) 585-6865
SECTION 12.11. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW
-------------
YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 12.12. No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 12.13. Successors. All agreements of the Company in this
----------
Indenture and the Convertible Notes shall bind its successor. All agreements of
the Trustee in this Indenture shall bind its successor.
SECTION 12.14. Severability. In case any provision in this Indenture
------------
or in the Convertible Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.15. Table of Contents, Headings, Etc. The Table of
--------------------------------
Contents, Cross-Reference Table, and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
[signature page follows]
-56-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
STILLWATER MINING COMPANY
By: /s/ CHARLES R. ENGLES
--------------------------------------------
Name: Charles R. Engles
---------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
COLORADO NATIONAL BANK,
as Trustee
By: /s/ PATRICIA M. PETERS
--------------------------------------------
Name: Patricia M. Peters
---------------------------------------
Title: Trust Officer
--------------------------------------
-57-
<PAGE>
STATE OF COLORADO )
) ss.:
COUNTY OF DENVER )
Personally appeared before me, the undersigned authority in and for
the said county and state, on this 29th day of April, within my jurisdiction,
the within named Charles R. Engles who acknowledged that he is Chairman and
Chief Executive Officer of Stillwater Mining Company, a Delaware corporation,
and that for and on behalf of the said corporation, and as its act and deed he
executed the above and foregoing instrument, after first having been duly
authorized by said corporation so to do.
/s/ NESA E. HASSANEIN
--------------------------------
NOTARY PUBLIC
My Commission Expires: February 1, 1997.
-58-
<PAGE>
STATE OF COLORADO )
) ss.:
COUNTY OF DENVER )
Personally appeared before me, the undersigned authority in and for
the said county and state, on this 29th day of April, within my
jurisdiction, the within named Patricia M. Peters who acknowledged that
he/she is Trust Officer of Colorado National Bank, a national banking
association, and that for and on behalf of the said corporation, and as its act
and deed he/she executed the above and foregoing instrument, after first haying
duly authorized by said corporation so to do.
/s/ SANDRA M. MARR
-----------------------------
NOTARY PUBLIC
My Commission Expires: February 15, 1997
-59-
<PAGE>
EXHIBIT A-1
[FORM OF FACE OF NOTE]
[Global Notes Legend]/1/
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Convertible Notes Legend]/2/
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER
IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED
BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS
AN "ACCREDITED INVESTOR"
<PAGE>
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION
OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR
HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO
CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT."
- -------------------------------
/1/ Applicable to Global Notes only
/2/ Applicable to certificated Restricted Convertible Notes only
A1-2
<PAGE>
No. ________
CUSIP No. ________
STILLWATER MINING COMPANY
7% CONVERTIBLE SUBORDINATED NOTES
DUE 2003
STILLWATER MINING COMPANY
Stillwater Mining Company, a Delaware corporation (the "Company") promises
to pay to
_________________________________________________________________ or registered
assigns, the principal sum [indicated on Schedule A hereof]* [of _________
Dollars]** on May 1, 2003, and to pay interest thereon beginning November 1,
1996 at the rate of 7% per annum.
Interest Payment Dates: May 1 and November 1,
commencing November 1, 1996
Record Dates: April 15 and October 15
Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place
- ------------------------
/*/ Applicable to Global Notes only.
/**/ Applicable to certificated Convertible Notes only.
A1-3
<PAGE>
IN WITNESS WHEREOF, Stillwater Mining Company has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.
Dated: _________________
STILLWATER MINING COMPANY
By
-------------------------------------
By
-------------------------------------
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the 7%
Convertible Subordinated Notes
due 2003 described in the
within-mentioned Indenture.
COLORADO NATIONAL BANK,
as Trustee
By
----------------------------
Authorized Officer
A1-4
<PAGE>
STILLWATER MINING COMPANY
7% Convertible Subordinated Note Due 2003
1. Interest. STILLWATER MINING COMPANY, a Delaware corporation (the
--------
"Company"), is the issuer of this 7% Convertible Subordinated Note Due 2003 (the
"Convertible Note"). The Company promises to pay interest on the Convertible
Notes in cash semiannually on each May 1 and November 1, commencing on November
1, 1996, to holders of record on the immediately preceding April 15 and October
15.
Interest on the Convertible Notes will accrue from the most recent
date to which interest has been paid, or if no interest has been paid, from
April 29, 1996. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.
2. Method of Payment. The Company will pay interest on the
-----------------
Convertible Notes (except defaulted interest) to the persons who are registered
holders of the Convertible Notes at the close of business on the record date for
the next interest payment date even though Convertible Notes are canceled after
the record date and on or before the interest payment date. The Noteholder
hereof must surrender Convertible Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail by first class mail an interest check to a
holder's registered address.
3. Paying Agent and Registrar. The Trustee will initially act as
--------------------------
Paying Agent, Registrar and Conversion Agent. The Company may change any Paying
Agent, Registrar, co-registrar or Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity.
4. Indenture. The Company issued the Convertible Notes under an
---------
indenture, dated as of April 29, 1996 (the "Indenture"), between the Company and
Colorado National Bank, as Trustee. The terms of the Convertible Notes include
those stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-77bbbb) as in effect on the date
of the Indenture. The Convertible Notes are subject to, and qualified by, all
such terms, certain of which are summarized hereon, and Noteholders are referred
to the Indenture and such Act for a statement of such terms. The Convertible
Notes are unsecured obligations of the Company limited to (except as otherwise
provided in the Indenture) up to an aggregate principal amount of $50,000,000
(plus up to $7,500,000 aggregate principal amount of Convertible Notes that may
be sold by the Company pursuant to the over allotment option granted pursuant to
the Purchase Agreement), and are subordinated in right of payment to all
existing and future Senior Debt of the Company as provided in the Indenture.
Any holder of this Convertible Note shall be deemed to have agreed to and be
bound by all the terms and conditions contained in the Indenture applicable to a
holder of a Convertible Note.
A1-5
<PAGE>
5. Optional Redemption. The Convertible Notes are not subject to
-------------------
redemption at the Company's option prior to May 1, 1999. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 20 nor more than 60 days' prior notice by first class mail at the
following redemption prices (expressed as percentages of the principal amount
set forth below), together with accrued interest up to but not including the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date), if redeemed
during the 12-month period beginning May 1 of the years indicated:
Redemption
Year Price
---- -----------------
1999.................................... 104%
2000.................................... 103%
2001.................................... 102%
2002.................................... 101%
and 100% at May 1, 2003. On or after the redemption date, interest will cease
to accrue on the Convertible Notes, or portion thereof, called for redemption.
6. Notice of Redemption. Notice of redemption will be mailed by
--------------------
first class mail at least 20 days but not more than 60 days before the
redemption date to each holder of the Convertible Notes to be redeemed at his
address of record. The Convertible Notes in denominations larger than $1,000
may be redeemed in part but only in integral multiples of $1,000. In the event
of a redemption of less than all of the Convertible Notes, the Convertible Notes
will be chosen for redemption by the Trustee in accordance with the Indenture.
Unless the Company defaults in making such redemption payment, or the Paying
Agent is prohibited from making such payment pursuant to the Indenture, interest
ceases to accrue on the Convertible Notes or portions of them called for
redemption on and after the redemption date.
If this Convertible Note is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any accrued interest will be paid to the person in
whose name this Convertible Note is registered at the close of business on such
record date.
7. Mandatory Redemption. The Company will not be required to make
--------------------
mandatory redemption payments with respect to the Convertible Notes. There are
no sinking fund payments with respect to the Convertible Notes.
8. Repurchase at Option of Holder. If there is a Designated Event,
------------------------------
the Company shall be required to offer to purchase on the Designated Event
Payment Date all outstanding Convertible Notes at a purchase price equal to 101%
of the principal amount thereof on the date of purchase, plus accrued and unpaid
interest to the Designated Event Payment Date. Holders of Convertible Notes
that are subject to an offer to purchase will receive a Designated Event Offer
from the Company prior to any related Designated Event Payment Date and may
elect to have such Convertible Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Noteholder To
Elect Purchase" appearing below. Noteholders have the right to withdraw their
election by delivering a written notice of withdrawal to the Paying Agent in
accordance with the terms of the Indenture.
A1-6
<PAGE>
9. Subordination. The payment of the principal of, interest on or
--------------
any other amounts due on the Convertible Notes is subordinated in right of
payment to all existing and future Senior Debt of the Company, as described in
the Indenture. Each Noteholder, by accepting a Convertible Note, agrees to such
subordination and authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and appoints the Trustee as its attorney-in-fact for such purpose.
10. Conversion. The holder of any Convertible Note has the right,
----------
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York City time) on the date of
the Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of $26.80 per share, subject to adjustment
under certain circumstances, except that if a Convertible Note is called for
redemption, the conversion right will terminate at the close of business on the
third Business Day immediately preceding the date fixed for redemption.
To convert a Convertible Note, a holder must (1) complete and sign a
notice of election to convert substantially in the form set forth below, (2)
surrender the Convertible Note to a Conversion Agent, (3) furnish appropriate
endorsements or transfer documents if required by the Registrar or Conversion
Agent and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any
Noteholder surrenders a Convertible Note for conversion after the close of
business on the record date for the payment of an installment of interest and
prior to the opening of business on the next interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date will be paid to the registered holder of such Convertible Note on such
record date. In such event, such Convertible Note not called for redemption
when surrendered for conversion, must be accompanied by payment in funds
acceptable to the Company of an amount equal to the interest payable on such
interest payment date on the portion so converted. The number of shares of
Common Stock issuable upon conversion of a Convertible Note is determined by
dividing the principal amount of the Convertible Note converted by the
Conversion Price in effect on the Conversion Date. No fractional shares will be
issued upon conversion but a cash adjustment will be made for any fractional
interest.
A Note in respect of which a holder has delivered an "Option of Noteholder
to Elect Purchase" form appearing below exercising the option of such holder to
require the Company to purchase such Note may be converted only if the notice of
exercise is withdrawn as provided above and in accordance with the terms of the
Indenture. The above description of conversion of the Convertible Notes is
qualified by reference to, and is subject in its entirety to, the more complete
description thereof contained in the Indenture.
11. Registration Rights. The holder of this Convertible Note is
-------------------
entitled to the benefits of a Registration Agreement, dated April 29, 1996,
between the Company and the Initial Purchaser (the "Registration Agreement").
Pursuant to the Registration Agreement the Company has agreed for the benefit of
the holders of the Convertible Notes, that (i) it will, at its cost, no later
than December 15, 1996, file a shelf registration statement (the "Shelf
Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) no later than February 15, 1997,
such Shelf Registration Statement shall be declared effective by the Commission
and (iii) the Company will maintain such Shelf Registration Statement
continuously effective under the Securities Act until the third anniversary (or
such shorter period as may then be applicable under
A1-7
<PAGE>
the Securities Act regarding the holding period for securities under Rule 144(k)
of the Securities Act or any successor rule) of the date of the closing of the
sale of the Convertible Notes (the "Closing"), or such earlier date as of which
all the Convertible Notes or the Common Stock issuable upon conversion thereof
have been sold pursuant to such Shelf Registration Statement. If the Company
fails to comply with clause (i) above then, at such time, the per annum interest
rate on the Convertible Notes will increase by 25 basis points. Such increase
will remain in effect until the date on which such Shelf Registration Statement
is filed, on which date the interest rate on the Convertible Notes will revert
to the interest rate originally borne by the Convertible Notes plus any increase
in such interest rate pursuant to the following sentence. If the Shelf
Registration Statement is not declared effective as provided in clause (ii)
above, then, at such time and on each date that would have been the successive
30th day following such time, the per annum interest rate on the Convertible
Notes (which interest rate will be the original interest rate on the Convertible
Notes plus any increase or increases in such interest rate pursuant to the
preceding sentence and this sentence) will increase by an additional 25 basis
points; provided that the interest rate will not increase by more than 50 basi s
points pursuant to this sentence and will not increase by more than 75 basis
points pursuant to this sentence and the preceding sentence. Such increase or
increases will remain in effect until the date on which such Shelf Registration
Statement is declared effective, on which date the interest rate on the
Convertible Notes will revert to the interest rate originally borne by the
Convertible Notes. Pursuant to clause (iii) above, however, if the Company
fails to keep the Shelf Registration Statement continuously effective for the
period specified above, then at such time as the Shelf Registration Statement is
no longer effective and on each date thereafter that is the successive 30th day
subsequent to such time and until the earlier of (i) the date that the Shelf
Registration Statement is again deemed effective or (ii) the date that is the
third anniversary of the Closing or (iii) the date as of which all of the
Convertible Notes and/or the Common Stock issuable upon conversion thereof are
sold pursuant to the Shelf Registration Statement, the per annum interest rate
on the Convertible Notes will increase by an additional 25 basis points;
provided, however, that the interest rate will not increase by more than 50
basis points pursuant to this sentence.
Pursuant to the Registration Agreement, the Company may suspend the
use of the prospectus which is a part of the Shelf Registration Statement for a
period not to exceed 45 days in any three month period or two periods not to
exceed an aggregate of 75 days in any twelve month period under certain
circumstances. The holders of Convertible Notes will not be entitled to
additional interest as set forth in the preceding paragraph solely because of
such permitted suspensions.
12. Denominations, Transfer, Exchange. The Convertible Notes are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.
13. Persons Deemed Owners. Except as provided in paragraph 2 of this
---------------------
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.
A1-8
<PAGE>
14. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company. After that, Noteholders of Convertible Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
15. Defaults and Remedies. The Convertible Notes shall have the
---------------------
Events of Default as set forth in Section 8.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Noteholders of at least
25% in aggregate principal amount of the then outstanding Convertible Notes by
notice to the Company and the Trustee may declare all the Convertible Notes to
be due and payable immediately, except that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all unpaid principal
and interest accrued on the Convertible Notes shall become due and payable
immediately without further action or notice. Upon acceleration as described in
either of the preceding sentences, the subordination provisions of the Indenture
preclude any payment being made to Noteholders for at least 5 days except as
otherwise provided in the Indenture.
The Noteholders of a majority in principal amount of the Convertible
Notes then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of
Default and remedies is qualified by reference to, and subject in its entirety
to, the more complete description thereof contained in the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain
-----------------------------------
exceptions, the Indenture or the Convertible Notes may be amended or
supplemented with the consent of the Noteholders of at least a majority in
principal amount of the then outstanding Convertible Notes (including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes), and any existing default may be waived with the consent of the
Noteholders of a majority in principal amount of the then outstanding
Convertible Notes including consents obtained in connection with a tender offer
or exchange offer for Convertible Notes. Without the consent of any Noteholder,
the Indenture or the Convertible Notes may be amended, among other things, to
cure any ambiguity, defect or inconsistency, to provide for assumption of the
Company's obligations to Noteholders, to make any change that does not adversely
affect the rights of any Noteholder, to qualify the Indenture under the TIA, and
to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
17. Trustee Dealings with the Company. The Trustee, in its
---------------------------------
individual or any other capacity, may become the owner or pledgee of Convertible
Notes and may otherwise deal with the Company or an Affiliate with the same
rights it would have if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
A1-9
<PAGE>
18. No Recourse Against Others. A director, officer, employee or
--------------------------
shareholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for
the issue of the Convertible Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
-------------
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
20. Authentication. The Convertible Notes shall not be valid until
--------------
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN
ENT (for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).
22. Definitions. Capitalized terms not defined in this Convertible
-----------
Note have the meaning given to them in the Indenture.
The Company will furnish to any Noteholder of the Convertible Notes
upon written request and without charge a copy of the Indenture. Request may be
made to:
Stillwater Mining Company
HC 54
Box 365
Nye, Montana 59061
Attention of: Chief Financial Officer
-----------------------
A1-10
<PAGE>
ASSIGNMENT FORM
To assign this Convertible Note, fill in the form below:
(I) or (we) assign and transfer this Convertible Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________ agent to
transfer this Convertible Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
-----------------------------------------
(Sign exactly as your name appears on
the other side of this Convertible Note)
Date: Signature Guarantee:***
----------------- ---------------------------------
In connection with any transfer of any of the Convertible Notes evidenced by
this certificate occurring prior to the date that is three years (or such
shorter period as may then be applicable under the Securities Act) after the
later of the date of original issuance of such Convertible Notes and the last
date, if any, on which such Convertible Notes were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Convertible Notes
are being transferred:
- --------------------------
*** Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A1-11
<PAGE>
CHECK ONE BOX BELOW
(1) [_] to the Company; or
(2) [_] pursuant to and in compliance with Rule 144A under the Securities
Act of 1933; or
(3) [_] pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(4) [_] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act of 1933 that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter can be obtained from the Trustee); or
(5) [_] pursuant to another available exemption from the registration
requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Convertible Notes evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that if
-------- -------
box (3), (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Convertible Notes such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided
by Rule 144 under such Act.
-------------------------------
Signature
Signature Guarantee:/*/
- ---------------------------- -------------------------------
Signature must be guaranteed Signature
- -------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Convertible Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is
- ----------------------
/*/ Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A1-12
<PAGE>
aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated: __________________ _________________________________________________
NOTICE: To be executed by an executive officer
A1-13
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
The initial principal amount at maturity of this Global Note shall be
$__________. The following increases or decreases in the principal amount of
this Global Note have been made:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Amount of increase
in
Principal Amount of
this Global Note Principal Amount of
including upon Amount of decrease this Global Note Signature of
exercise of the over in Principal Amount following such authorized officer of
Date Made allotment option of this Global Note decrease or increase Trustee or Custodian
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
A1-14
<PAGE>
OPTION OF NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Convertible Note or a portion
thereof repurchased by the Company pursuant to Section 3.08 or 4.07 of the
Indenture, check the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: ________________
Your Signature:__________________________________________
(Sign exactly as your name appears on the
other side of this Convertible Note)
Date:____________________________________________________
Signature Guarantee: /*/_________________________________
___________________
/*/ Signature must be guaraneed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
A1-15
<PAGE>
ELECTION TO CONVERT
To Stillwater Mining Company:
The undersigned owner of this Convertible Note hereby irrevocably
exercises the option to convert this Convertible Note, or the portion below
designated, into Common Stock of STILLWATER MINING COMPANY in accordance with
the terms of the Indenture referred to in this Convertible Note, and directs
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Any Noteholder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Note, agrees to
be bound by the terms of the Registration Agreement relating to the Common Stock
issuable upon conversion of the Convertible Note.
Date:
in whole [ ]
Portions of Convertible Note to be converted
($1,000 or integral multiples thereof):
$_______________________________________________
_____________________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
Signature Guarantee: *_______________________________
___________________
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A1-16
<PAGE>
EXHIBIT A-2
[FACE OF REGULATION S TEMPORARY GLOBAL NOTE]
================================================================================
No. ________
CUSIP No. ________
STILLWATER MINING COMPANY
7% CONVERTIBLE SUBORDINATED NOTES
DUE 2003
STILLWATER MINING COMPANY
Subject to the provisions hereof, Stillwater Mining Company, a Delaware
corporation (the "Company") promises to pay to
_________________________________________________________________ or registered
assigns, the principal sum indicated on Schedule A hereof on May 1, 2003, and to
pay interest thereon beginning November 1, 1996 at the rate of 7% per annum.
Interest Payment Dates: May 1 and November 1,
commencing November 1, 1996
Record Dates: April 15 and October 15
Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.
A2-1
<PAGE>
IN WITNESS WHEREOF, Stillwater Mining Company has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.
Dated: _________________
STILLWATER MINING COMPANY
By __________________________________________
By __________________________________________
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the 7%
Convertible Subordinated Notes
due 2003 described in the
within-mentioned Indenture.
COLORADO NATIONAL BANK,
as Trustee
By ____________________________
Authorized Officer
================================================================================
A2-2
<PAGE>
[Back of Regulation S Temporary Global Note]
7% Convertible Note due 2003
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY
CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE
903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE
COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
A2-3
<PAGE>
INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION
OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF
REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR
HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO
CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (O)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT."
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
Interest on the Convertible Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance in accordance with the terms hereof. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
This Regulation S Temporary Global Note is issued in respect of an issue of
7% Convertible Subordinated Notes due 2003 (the "Convertible Notes") of the
Company, limited to the aggregate principal amount of U.S. $50,000,000 (plus
$7,500,000 aggregate principal amount of Convertible Notes that may be sold by
the Company pursuant to the over allotment option granted pursuant to the
Purchase Agreement) issued pursuant to an Indenture (the "Indenture") dated as
of April 29, 1996, between the Company and Colorado National Bank, as trustee
(the "Trustee"), and is governed by the terms and conditions of the Indenture
governing the Convertible Notes, which terms and conditions are incorporated
herein by reference
A2-4
<PAGE>
and, except as otherwise provided herein, shall be binding on the Company and
the holder hereof as if fully set forth herein. Unless the context otherwise
requires, the terms used herein shall have the meanings specified in the
Indenture.
Until this Regulation S Temporary Global Note is exchanged for Regulation S
Permanent Global Notes, the holder hereof shall not be entitled to receive
payments of interest hereon; until so exchanged in full, this Regulation S
Temporary Global Note shall in all other respects be entitled to the same
benefits as other Convertible Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or in part
for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or Rule 144A Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This
Regulation S Temporary Global Note shall be governed by and construed in
accordance with the laws of the State of New York. All references to "$,"
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts therein.
A2-5
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
Colorado National Bank
950 Seventeenth Street
Suite 2450
Denver, Colorado 80202
Attention: Corporate Trust Division
Re: 7% Convertible Subordinated Notes due 2003 of Stillwater Mining
Company (the "Convertible Notes")
Reference is hereby made to the Indenture, dated as of April 29, 1996
(the "Indenture"), between Stillwater Mining Company, as issuer (the "Company")
and Colorado National Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to the Convertible Notes which are evidenced by
one or more Rule 144A Global Notes (CUSIP No. 86074QAA0) and held with the
Depositary in the name of Cede & Co. (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Convertible Notes to a
Person who will take delivery thereof in the form of an equal principal amount
of Convertible Notes evidenced by one or more Regulation S Global Notes (SINS
No. U85969AA8), which amount, immediately after such transfer, is to be held
with the Depositary through Euroclear or Cedel or both (Common Code
_____________).
In connection with such request and in respect of such Convertible
Notes, the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Convertible Notes was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting
on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
B1-1
<PAGE>
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel or both (Common Code ____________).
Upon giving effect to this request to exchange a beneficial interest
in a Rule 144A Global Note for a beneficial interest in a Regulation S Global
Note, the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act and, if such transfer occurs prior to the end of the 40-day
restricted period associated with the initial offering of Convertible Notes, the
additional restrictions applicable to transfers of interest in the Regulation S
Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Salomon Brothers Inc, Seven World
Trade Center, New York, New York, the initial purchaser of such Convertible
Notes being transferred. Terms used in this certificate and not otherwise
defined in the Indenture have the meanings set forth in Regulation S under the
Securities Act.
___________________________________________
[Insert Name of Transferor]
By: _______________________________________
Name:
Title:
Dated: ____________________, ____
cc: Stillwater Mining Company
Salomon Brothers Inc
B1-2
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
Colorado National Bank
950 Seventeenth Street
Suite 2450
Denver, Colorado 80202
Attention: Corporate Trust Division
Re: 7% Convertible Subordinated Notes due 2003 of Stillwater Mining
Company (the "Convertible Notes")
Reference is hereby made to the Indenture, dated as of April 29, 1996
(the "Indenture"), between Stillwater Mining Company, as issuer (the "Company")
and Colorado National Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to the Convertible Notes which are evidenced by
one or more Regulation S Global Notes (SINS No. U85969AA8) and held with the
Depositary through [Euroclear] [Cedel] (Common Code ___________________) in the
name of ____________________ (the "Transferor"). The Transferor has requested a
transfer of such beneficial interest in the Notes to a Person who will take
delivery thereof in the form of an equal principal amount of Notes evidenced by
one or more Rule 144A Global Notes (CUSIP No. 86074QAA0), to be held with the
Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
or
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
B2-1
<PAGE>
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Convertible Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Convertible Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in Rule 144A Global
Notes, the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Rule 144A Global Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Salomon Brothers Inc, Seven World
Trade Center, New York, New York, the initial purchaser of such Convertible
Notes being transferred.
___________________________________________
[Insert Name of Transferor]
By: _______________________________________
Name:
Title:
Dated: _____________, _____
cc: Stillwater Mining Company
Salomon Brothers Inc
B2-2
<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED CONVERTIBLE NOTES
(Pursuant to Section 2.06(b) of the Indenture)
Colorado National Bank
950 Seventeenth Street
Suite 2450
Denver, Colorado 80202
Attention: Corporate Trust Division
Re: 7% Convertible Subordinated Notes due 2003 of Stillwater Mining
Company (the "Convertible Notes")
Reference is hereby made to the Indenture, dated as of April 29, 1996
(the "Indenture"), between Stillwater Mining Company, as issuer (the "Company")
and Colorado Natioanl Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with such request and in respect of the Convertible
Notes surrendered to the Trustee herewith for exchange (the "Surrendered
Notes"), the holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification)
B3-1
<PAGE>
in form reasonably acceptable to the Company and to the Registrar, to
the effect that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Salomon Brothers Inc, Seven World
Trade Center, New York, New York, the initial purchaser of such Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By:_______________________________
Name:
Title:
Dated: _____________, _____
cc: Stillwater Mining Company
Salomon Brothers Inc
B3-2
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE
TO CERTIFICATED CONVERTIBLE NOTE
(Pursuant to Section 2.06(c) of the Indenture)
Colorado National Bank
950 Seventeenth Street
Suite 2450
Denver, Colorado 80202
Attention: Corporate Trust Division
Re: 7% Convertible Subordinated Notes due 2003 of Stillwater Mining
Company (the "Convertible Notes")
Reference is hereby made to the Indenture, dated as of April 29, 1996
(the "Indenture"), between Stillwater Mining Company, as issuer (the "Company")
and Colorado National Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
B4-1
<PAGE>
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Salomon Brothers Inc, Seven World
Trade Center, New York, New York, the initial purchaser of such Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By:____________________________________
Name:
Title:
Dated: _____________, _____
cc: Stillwater Mining Company
Salomon Brothers Inc
B4-2
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of August 10, 1998, is by and between STILLWATER
MINING COMPANY, a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"), and William E. Nettles ("Employee").
WHEREAS, the Company desires to employ Employee and Employee desires to be
employed by the Company pursuant to the terms and conditions of this Agreement;
and
WHEREAS, the Company has heretofore determined that it is in the best
interests of the Company and its stockholders to assure that the Company will
have the continued dedication of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company;
and
WHEREAS, the Company has determined it is imperative to diminish the
inevitable distraction of the Employee by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control and to provide the Employee
with compensation and benefits arrangements upon a Change of Control which
ensure that the compensation and benefits to be paid to the Employee are at
least as favorable as those in effect at the time of the Change of Control and
which are competitive with those of other corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
ARTICLE 1
EMPLOYMENT
The Company hereby employs Employee, and Employee agrees to serve, as Chief
Executive Officer for the Company.
ARTICLE 2
BOARD MEMBERSHIP
Employee shall initially be appointed as Chairman of the Board of
Directors, and the Company shall nominate and shall use its reasonable efforts
to cause Employee to be elected to serve as a member of the Board of Directors.
Failure by the Company to cause Employee to continue in office as Chairman of
the Board of Directors or to be elected to serve as a member of the Board of
Directors shall not be a breach of this Agreement. Failure by the Company to
cause Employee to continue in office as Chairman of the Board of Directors shall
be "Good Reason" (as defined in Section 6.1 below) for Employee to terminate
this Agreement.
<PAGE>
ARTICLE 3
TERM
The term of this Agreement shall be for a period commencing August 13,
1997, and ending December 31, 2000, unless sooner terminated as hereinafter
provided. The Agreement shall thereafter continue for subsequent two (2) year
terms, commencing January 1, unless altered or terminated as hereinafter
provided; provided, however, that following a Change of Control, as defined in
Section 6.6, the Employment Term shall continue for no less than two (2)
additional years. The period of Employee's employment hereunder, including any
extension or extensions pursuant to the foregoing sentence, from the date of
commencement until the date of expiration or termination of this Agreement, is
referred to hereinafter as the "Employment Term."
ARTICLE 4
DUTIES AND AUTHORITY
Employee agrees, unless otherwise specifically authorized by the Company,
to devote substantially all of his business time and effort to do his duties for
the profit, benefit and advantage of the business of the Company, except that
Employee may serve on the boards of directors of other business corporations
that have no business relationship with the Company and which do not compete
with the Company. In performing his duties hereunder, Employee shall have the
authority customarily held by others holding positions similar to do those
assigned to Employee in similar businesses, subject to the general and customary
supervision of the Company's Board of Directors.
ARTICLE 5
COMPENSATION
5.1 Base Salary. The Company agrees to pay Employee a base salary of
-----------
Three Hundred Twenty-five Thousand Dollars ($325,000.00) per year, payable at
the usual times for the payment of the Company's executive employees, subject to
adjustment as provided herein. Employee's base salary shall be reviewed at
least annually and may be increased, but not decreased, consistent with general
salary increases for the Company's executive employees or as appropriate in
light of the performance of Employee and the Company. Notwithstanding anything
herein to the contrary, Employee's base salary may be reduced in the event of an
across-the-board salary reduction for all executive officers; provided, however,
that the percentage reduction of Employee's base salary shall not exceed the
highest percentage reduction in base salary of any other executive officer.
5.2 Incentive Compensation. Employee shall participate in the Company's
----------------------
incentive compensation plans for executive officers of the Company, which plans
will be in effect during the Employment Term. The Company will provide for a
performance based cash bonus in an amount to be determined by the Board of
Directors of the Company (the "Annual Bonus") (the target of which shall be 50%
of Employee's base salary and the maximum of which shall not exceed 100% of
Employee's base salary). For the period from August 13, 1997 through August 12,
1998, Employee shall be guaranteed a bonus of no less than 65% of Employee's
original base salary of $275,000.00.
-2-
<PAGE>
5.3 Employee Benefits. Employee shall be eligible to participate in such
-----------------
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term;
provided, however, that Employee shall be entitled to four weeks of vacation per
year during the initial term of this Agreement and during the term of each
extension hereof. In the event that Employee is ineligible to participate in
the Company's existing health plan, either in general or with respect to any
pre-existing condition, the Company shall provide Employee with comparable
health care benefits.
5.4 Options. Annually, on a calendar year basis, the Company shall grant
-------
to Employee the right and option to purchase from the Company shares of Common
Stock under the Company's 1994 Stock Plan, in an amount and with terms
determined by the Compensation Committee of the Board of Directors. (On June
1, 1998, the Employee was granted options for 80,000 shares which were granted
earlier than August 13, 1998, satisfying such obligation for 1998.)
ARTICLE 6
TERMINATION
6.1 Termination by the Company Without Cause; Termination by Employee for
---------------------------------------------------------------------
Good Reason.
- -----------
(a) The Company shall have the right to terminate this Agreement
without Cause (as defined below) upon ninety (90) days' notice to Employee.
If Employee's employment hereunder is terminated by the Company without
Cause or by Employee for "Good Reason" (as defined below) (other than a
termination involving a Change of Control or by reason of death or
disability), the Company shall pay Employee at the time of such termination
the following severance benefits for a three (3) year period following the
date of termination, if such termination occurs on or before December 31,
2000, and for a two (2) year period following the date of termination if
such termination occurs after such date:
(i) Annual base salary at the rate in effect immediately prior
to the termination date;
(ii) Bonus payable in such amount as would be payable to
Employee had he been employed by the Company for the full Termination
Period, at the target level in effect immediately prior to the
termination date, assuming the Company had achieved targeted
performance objectives for such period;
(iii) During the Termination Period, the Company shall timely pay
or provide to Employee any other amounts or benefits required to be
paid or provided or which Employee is eligible to receive under any
plan or policy of the Company to the same extent that Employee would
be eligible therefor if he were employed on a full-time basis by the
Company in the capacity provided for herein during the
-3-
<PAGE>
Termination Period (the "Other Benefits"); provided, however, that
should Employee be employed by another employer during the Termination
Period and become entitled to receive Other Benefits from such
employer, the Company's obligation to provide such Other Benefits
hereunder shall be terminated;
(iv) The Company shall make available to Employee post-placement
services for corporate executives at levels customary for executives
in Employee's position in the Company's industry; and
(v) All of the then outstanding Options (to the extent not then
exercisable) shall immediately become exercisable and Employee may
exercise the Options in full in accordance with Section 7 of the Stock
Option Agreement attached hereto as Exhibit A.
---------
(b) For purposes of this Agreement, other than Section 6.6 hereof,
"Good Reason" shall mean:
(i) A substantial and material alteration in the nature or
status of the Employee's responsibilities, or the assignment of duties
inconsistent with, or a substantial and material alteration in the
nature or status of, the Employee's responsibilities;
(ii) Failure by the Company to cause Employee to continue in
office as Chairman of the Board of Directors;
(iii) Employee's job is eliminated other than by reason of
termination for Cause;
(iv) The Company fails to pay Employee any amount otherwise
vested and due hereunder or under any plan or policy of the Company,
which failure is not cured within ten (10) business days of receipt by
the Company of written notice from Employee which describes in
reasonable detail the amount which is due;
(v) A material reduction in Employee's base salary except in
the event of an across-the-board salary reduction for all executive
officers;
(vi) A material reduction in Employee's aggregate level of
benefits under the Company's pension, life insurance, medical, health
and accident, disability, deferred compensation or savings or similar
plans, except in the event of an across-the-board reduction in such
benefits for all executive officers;
(vii) A material reduction in Employee's reasonable opportunity
to earn incentive compensation under any plan in which Employee is a
participant,
-4-
<PAGE>
except in the event of an across-the-board reduction in such benefits
for all executive officers;
(viii) Employee's office is relocated outside of a 50-mile radius
of Denver, Colorado, without his written consent;
(ix) The Company and its successor(s) (as described in
subparagraph (x) below) shall discontinue the business of the Company;
(x) The failure of the Company to obtain an agreement to
expressly assume this Agreement from any successor to the Company
(whether such succession is direct or indirect by purchase, merger,
consolidation or otherwise, to substantially all of the business
and/or assets of the Company or a controlling portion of the Company's
stock); or
(xi) After January 1, 1999, failure by the Company to grant on
an annual basis stock options to purchase at least 80,000 shares of
Common Stock, assuming performance targets are satisfied, or to
provide that such options will vest on death or disability of
Employee.
For purposes of Section 6.6 hereof, "Good Reason" shall include all of the
events or circumstances set forth in Section 6.1(b), except for clause (ii)
above. Solely for the purposes of Section 6.6, any good faith determination of
Good Reason made by the Employee shall be conclusive.
6.2 Termination by the Company for Cause; Voluntary Termination by
--------------------------------------------------------------
Employee. Employee's employment hereunder may be terminated by the Company for
- --------
"Cause." For purposes of this Agreement, other than Section 6.6 hereof, "Cause"
shall mean:
(i) Misfeasance or nonfeasance of duty by the Employee intended
to injure or having the effect of injuring the reputation, business or
business relationships of the Company or any officers, directors or
employees;
(ii) The willful and continued failure of Employee to perform
substantially Employee's duties under this Agreement (except by reason
of physical or mental incapacity) after a written demand for
substantial performance is delivered to Employee by the Board of
Directors which specifically identifies the manner in which the Board
believes that Employee has not substantially performed Employee's
duties which is not remedied or reasonable steps to effect such remedy
are not commenced within fifteen (15) days after such demand is
received by Employee and diligently pursued to completion;
(iii) Employee's dishonesty in the performance of his duties
hereunder, or
-5-
<PAGE>
(iv) Employee's conviction of a felony, any crime involving
moral turpitude, or any crime which could reflect unfavorably upon the
Company.
Employee shall have the right to voluntarily terminate this Agreement upon
ninety (90) days' notice to the Company. If Employee is terminated for Cause,
or if Employee voluntarily terminates employment hereunder other than for Good
Reason, he shall be entitled to receive his base salary through the date of
termination. All other benefits, if any, payable to Employee following such
termination of Employee's employment shall be determined in accordance with the
plans, policies and practices of the Company.
6.3 Notice of Termination. Any termination by the Company or by the
---------------------
Employee shall be communicated by Notice of Termination to the other party
hereto given in accordance with Article 19 of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Termination Date
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Employee or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the Company, respectively,
from asserting such fact or circumstance in enforcing the Employee's or the
Company's rights hereunder.
6.4 Termination Date. "Termination Date" means the date of receipt of the
----------------
Notice of Termination or any later date specified therein, as the case may be.
6.5 Termination by Death or Disability. Upon termination of Employees'
----------------------------------
employment due to death of Employee, Employee shall be entitled to his base
salary at the rate in effect at the time of Employee's death through the end of
the month in which his death occurs, as well as the target annual bonus prorated
through the end of the month in which death occurs. Employee's employment
hereunder may be terminated by the Company if Employee becomes physically or
mentally incapacitated and (i) is unable for a period of one hundred eighty
(180) consecutive days to perform his duties and (ii) a determination is made
regarding Employee's disability by a physician appointed by the chief
administrator of University Hospital, Denver, Colorado, or another health
professional agreed upon by the Company and Employee (such incapacity is
hereinafter referred to as "Disability"). Upon any such termination for
Disability, Employee shall be entitled to receive his base salary, as well as
the target annual bonus, prorated in each case through the date on which
Employee is first eligible to receive payment of disability benefits in lieu of
salary under the Company's employee benefit plans as then in effect.
-6-
<PAGE>
6.6 Termination Following a Change of Control; Benefits.
---------------------------------------------------
(a) In the event there is a Termination Following a Change of
Control, the Agreement shall terminate and Employee shall be entitled to
the following severance benefits:
(i) 300 percent of Employee's annual base salary at the rate in
effect immediately prior to the Change of Control or on the
Termination Date, whichever is higher, payable in a lump sum within
sixty (60) days after the Termination Date;
(ii) 300 percent of the higher of (x) the Employee's target
bonus in effect immediately prior to the Change of Control (or on the
Termination Date, whichever is higher) or (y) the Annual Bonus paid or
payable for the most recently completed fiscal year during the
Employment Term, if any (such higher amount being referred to as the
"Highest Annual Bonus").
(iii) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to Employee any other amounts or benefits
required to be paid or provided or which Employee is eligible to
receive under any plan, program, policy, practice, contract or
agreement of the Company (other than severance pay) to the same extent
that Employee would be eligible therefor if he were employed on a
full-time basis by the Company in the capacity provided for herein for
a period of 36 months after the Termination Date, including receiving
the full benefit of three (3) years of employment at the income levels
provided for herein for purposes of any retirement plan utilizing
years of service as a criteria in the provision of benefits (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits"); provided, however, that to the extent Employee,
following the Termination Date, becomes employed by another employer
and becomes entitled to receive health insurance benefits from such
employer, the Company's obligation to provide such health insurance
benefits hereunder shall be decreased;
(iv) All accrued compensation (including base salary and Highest
Annual Bonus, each prorated through the Termination Date) and
unreimbursed expenses through the Termination Date. Such amounts
shall be paid to Employee in a lump sum in cash within thirty (30)
days after the Termination Date.
(v) The Employee shall be free to accept other employment
following such Termination, and, except as provided herein, there
shall be no offset of any employment compensation earned by the
Employee in such other employment during such period against payments
due Employee hereunder, and there shall be no offset in any
compensation received from such other employment against the continued
salary set forth above.
-7-
<PAGE>
(b) For purposes of this Section 6.6, the following terms shall have
the meanings set forth below:
(i) A "Change in Control" of the Company shall mean and shall
be deemed to have occurred if any of the following events shall have
occurred:
(a) Any person (as defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities
of the Company (not including in the securities beneficially
owned by such person any securities acquired directly from the
Company or its affiliates) representing 30% or more of the
combined voting power of the Company's then outstanding
securities, excluding any person who becomes such a beneficial
owner in connection with a transaction described in clause (i) of
paragraph (c) below; or
(b) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously
so approved or recommended; or
(c) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof) at least 55% of the combined voting power of
the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no person is or becomes the beneficial
owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly
-8-
<PAGE>
from the Company or its affiliates) representing 30% or more of
the combined voting power of the Company's then outstanding
securities; or
(d) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least
60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially
the same proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of
transactions.
(ii) "Termination Following a Change of Control" shall mean a
Termination of the Employee without Cause by the Company in connection
with or within two years following a Change of Control or a
termination by the Employee for Good Reason of the Employee's
employment with the Company within two years following a Change of
Control.
(iii) "Cause" shall mean:
(a) Misfeasance or nonfeasance by the Employee in the
performance of his duties under this Agreement intended to injure
the Company which has a material adverse effect on the Company's
business or operations, if such failure is not remedied or
reasonable steps to effect such remedy are not commenced within
thirty (30) days after written notice of such violation; or
(b) Employee's conviction of a felony or any crime
involving moral turpitude.
6.7 Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or
-9-
<PAGE>
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 6.7) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 6.7(a),
if it shall be determined that the Employee is entitled to a Gross-Up
Payment, but that the Employee, after taking into account the Payments and
the Gross-Up Payment, would not receive a net after-tax benefit of at least
$10,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to the Employee resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Employee and the Payments, in the aggregate, shall be
reduced to the Reduced Amount.
(b) Subject to the provisions of Section 6.7(c), all determinations
required to be made under this Section 6.7, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by Price Waterhouse LLP or such other certified public accounting firm
as may be designated by the Employee (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within fifteen (15) business days of the receipt of notice from
the Employee that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 6.7, shall be paid by the Company to the Employee within five
(5) days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 6.7(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall
-10-
<PAGE>
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after the
Employee is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested
to be paid. The Employee shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period that it desires
to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 6.7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Employee to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Employee, on an interest-free basis and shall
indemnify and hold the Employee harmless,
-11-
<PAGE>
on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 6.7(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 6.7(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Employee of an amount advanced by the Company
pursuant to Section 6.7(c), a determination is made that the Employee shall
not be entitled to any refund with respect to such claim and the Company
does not notify the Employee in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
ARTICLE 7
INSURANCE
7.1 Key Man Insurance. Employee agrees that the Company may, from time to
-----------------
time, apply for and take out in its own name and at its own expense, life,
health, accident, or other insurance upon Employee that the Company may deem
necessary or advisable to protect its interests hereunder; and Employee agrees
to submit to any medical or other examination necessary for such purposes and to
assist and cooperate with the Company in preparing such insurance; and Employee
agrees that he shall have no right, title, or interest in or to such insurance.
7.2 Directors' and Officers' Insurance. The Company shall use
----------------------------------
commercially reasonable efforts to obtain and maintain directors' and officers'
liability insurance coverage in an amount equivalent to that of a well-insured,
similarly situated company; provided, however, that the failure to obtain and
maintain such insurance after the Company has exercised such commercially
reasonable efforts shall not be a breach of the Company's obligations under this
Agreement. Any directors' and officers' liability insurance covering Employee
shall continue to apply following the period in which the Employee is serving as
officer or director of the Company for actions or omissions during the period in
which Employee was acting as officer or director.
-12-
<PAGE>
ARTICLE 8
FACILITIES AND EXPENSES
The Company shall make available to Employee such office space, secretarial
services, office equipment and furnishings as are suitable and appropriate to
Employee's title and duties. The Company shall promptly reimburse Employee for
all reasonable expenses incurred in the performance of his duties hereunder,
including expenses for entertainment, travel, management seminars and use of the
telephone, subject to the Company's reasonable requirements with respect to the
reporting and documentation of such expenses.
ARTICLE 9
NONCOMPETITION
9.1 Necessity of Covenant. The Company and Employee acknowledge that:
---------------------
(a) The Company's business is highly competitive;
(b) The Company maintains confidential information and trade secrets
as described in Article 10, all of which are zealously protected and kept
secret by the Company;
(c) In the course of his employment, Employee will acquire certain of
the information described in Article 10, and in the event of the
termination of Employee's employment, the Company would be adversely
affected if such information is used for the purposes of competing with the
Company;
(d) The Company transacts business throughout the world; and
(e) For these reasons, both the Company and Employee further
acknowledge and agree that the restrictions contained herein are reasonable
and necessary for the protection of their respective legitimate interests
and that any violation of these restrictions would cause substantial injury
to the Company.
9.2 Covenant Not to Compete. Employee agrees that from and after the date
-----------------------
hereof during the Employment Term and for a period of one (1) year after
cessation of employment with the Company, he will not, without the express
written permission of the Company, which may be given or withheld in the
Company's sole discretion, directly or indirectly own, manage, operate, control,
lend money to, endorse the obligations of, or participate or be connected as an
officer, director, 5% or more stockholder of a publicly-held company,
stockholder of a closely-held company, employee, partner, or otherwise, with any
enterprise or individual engaged in a business which is competitive with the
Platinum Group Metals business conducted by the Company at the time of cessation
of employment with the Company. It is understood and acknowledged by both
parties that, inasmuch as the Company transacts business worldwide, this
covenant not to compete shall be enforced throughout the United States and in
any other country in which the Company is doing business as of the date of
Employee's cessation of employment.
-13-
<PAGE>
9.3 Disclosure of Outside Activities. Employee, during the term of his
--------------------------------
employment by the Company, shall at all times keep the Company informed of any
outside business activity and employment, and shall not engage in any outside
business activity or employment which may be in conflict with the Company's
interests.
9.4 Survival. The terms of this Article 9 shall survive the expiration or
--------
termination of this Agreement for any reason.
ARTICLE 10
CONFIDENTIAL INFORMATION AND TRADE SECRETS
10.1 Nondisclosure of Confidential Information. Employee has acquired and
-----------------------------------------
will acquire certain "Confidential Information" of the Company. "Confidential
Information" shall mean any information that is not generally known, including
trade secrets, outside the Company and that is proprietary to the Company,
relating to any phase of the Company's existing or reasonably foreseeable
business which is disclosed to Employee by the Company including information
conceived, discovered or developed by Employee. Confidential Information
includes, but shall not be limited to, business plans, financial statements and
projections, operating forms (including contracts) and procedures, payroll and
personnel records, marketing materials and plans, proposals, software codes and
computer programs, project lists, project files, price information and cost
information and any other document or information that is designated by the
Company as "Confidential." The term "trade secret" shall be defined as follows:
A trade secret may consist of any formula, pattern, device or compilation
of information which is used in one's business, and which provides to the
holder an opportunity to obtain an advantage over competitors who do not
know or use it.
Accordingly, employee agrees that he shall not, during the Employment Term and
for three (3) years after cessation of employment with the Company, use for his
own benefit such Confidential Information or trade secrets acquired during the
term of his employment by the Company. Further, during the Employment Term and
for three (3) years after cessation of employment with the Company, Employee
shall not, without the written consent of the Board of Directors of the Company
or a person duly authorized thereby, which consent may be given or withheld in
the Company's sole discretion, disclose to any person, other than an employee of
the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by Employee of his duties, any
Confidential Information or trade secrets obtained by him while in the employ of
the Company.
10.2 Return of Confidential Information. Upon termination of employment,
----------------------------------
Employee agrees to deliver to the Company all materials that include
Confidential Information or trade secrets, and all other materials of a
confidential nature which belong to or relate to the business of the Company.
-14-
<PAGE>
10.3 Exceptions. The restrictions and obligations in Section 9.1 shall not
----------
apply with respect to any Confidential Information which: (i) is or becomes
generally available to the public through any means other than a breach by
Employee of his obligations under this Agreement; (ii) is disclosed to Employee
without an obligation of confidentiality by a third party that is not an
affiliate of the Company who has the right to make such disclosure; (iii) is
developed by Employee independent of his performance of duties hereunder without
use of or benefit from the Confidential Information; (iv) was in possession of
Employee without obligations of confidentiality prior to receipt under this
Agreement; (v) is required to be disclosed to enforce rights under this
Agreement; or (vi) is required to be disclosed by Law.
10.4 Survival. The terms of this Article 10 shall survive the expiration
--------
or termination of this Agreement for any reason.
ARTICLE 11
JUDICIAL CONSTRUCTION
Employee believes and acknowledges that the provisions contained in this
Agreement, including the covenants contained in Articles 9 and 10 of this
Agreement, are fair and reasonable. Nonetheless, it is agreed that if a court
finds any of these provisions to be invalid in whole or in part under the laws
of any state, such finding shall not invalidate the covenants, nor the Agreement
in its entirety, but rather the covenants shall be construed and/or blue-lined,
reformed or rewritten by the court as if the most restrictive covenants
permissible under applicable law were contained herein.
ARTICLE 12
RIGHT TO INJUNCTIVE RELIEF
Employee acknowledges that a breach by Employee of any of the terms of
Articles 9 or 10 of this Agreement will render irreparable harm to the Company;
and that in the event of such breach the Company shall therefore be entitled to
any and all equitable relief, including, but not limited to, injunctive relief,
and to any other remedy that may be available under any applicable law or
agreement between the parties.
ARTICLE 13
CESSATION OF CORPORATE BUSINESS
This Agreement shall cease and terminate if the Company shall discontinue
its business, and all rights and liabilities hereunder shall cease, except as
provided in Section 6.4 and Article 14.
-15-
<PAGE>
ARTICLE 14
ASSIGNMENT
14.1 Permitted Assignment. Subject to the provisions of Section 6.4, the
--------------------
Company shall have the right to assign this contract to its successors or
assigns, and all covenants or agreements hereunder shall inure to the benefit of
and be enforceable by or against its successors or assigns.
14.2 Successors and assigns. The terms "successors" and "assigns" shall
----------------------
mean any person or entity which buys all or substantially all of the Company's
assets, or a controlling portion of its stock, or with which it merges or
consolidates.
ARTICLE 15
FAILURE TO DEMAND, PERFORMANCE AND WAIVER
The failure by either party to demand strict performance and compliance
with any part of this Agreement during the Employment Term shall not be deemed
to be a waiver of the rights of such party under this Agreement or by operation
of law. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof.
ARTICLE 16
ENTIRE AGREEMENT
The Company and Employee acknowledge that this Agreement contains the full
and complete agreement between and among the parties, that there are no oral or
implied agreements or other modifications not specifically set forth herein, and
that this Agreement supersedes any prior agreements or understandings, if any,
between the Company and Employee, whether written or oral. The parties further
agree that no modifications of this Agreement may be made except by means of a
written agreement or memorandum signed by the parties.
ARTICLE 17
GOVERNING LAW
The parties hereby agree that this Agreement and the Exhibit attached
hereto shall be construed in accordance with the laws of the State of Colorado,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
ARTICLE 18
ATTORNEYS' FEES
Prior to a Change of Control, if either party shall commence any action or
proceeding against the other that arises out of the provisions hereof, or to
recover damages as the result of the alleged breach of any of the provisions
hereof, the prevailing party therein shall be entitled to recover all reasonable
costs incurred in connection therewith, including reasonable attorneys' fees.
Following a Change of Control, should a dispute arise under this Agreement, or
any action or proceeding be
-16-
<PAGE>
commenced to recover damages as a result of an alleged breach of the terms of
this Agreement, the Company shall be required to pay the costs of Employee
incurred in connection therewith, including reasonable attorneys' fees.
ARTICLE 19
NOTICE
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
William E. Nettles
1364 Lupine Way
Golden, Colorado 80401
If to the Company:
Stillwater Mining Company
HC 54 Box 365
Nye, Montana 59061
ARTICLE 20
COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the Company has hereunto signed its name and Employee
hereunder has signed his name, all as of the day and year first-above written.
STILLWATER MINING COMPANY
By: /s/ RAY BALLMER
--------------------------------------
Name: Ray Ballmer
-------------------------------
Title: Director
------------------------------
EMPLOYEE
/s/ WILLIAM E. NETTLES
_________________________________________
William E. Nettles
-17-
<PAGE>
Exhibit 10.2
FORM OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of ______________, is by and between STILLWATER
MINING COMPANY, a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"), and ________________ ("Employee").
WHEREAS, the Company desires to employ Employee and Employee desires to be
employed by the Company pursuant to the terms and conditions of this Agreement;
and
WHEREAS, the Company has heretofore determined that it is in the best
interests of the Company and its stockholders to assure that the Company will
have the continued dedication of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company;
and
WHEREAS, the Company has determined it is imperative to diminish the
inevitable distraction of the Employee by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control and to provide the Employee
with compensation and benefits arrangements upon a Change of Control which
ensure that the compensation and benefits to be paid to the Employee are at
least as favorable as those in effect at the time of the Change of Control and
which are competitive with those of other corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
ARTICLE 1
EMPLOYMENT
The Company hereby employs Employee, and Employee agrees to serve as
___________ for the Company.
ARTICLE 2
TERM
The term of this Agreement shall be for a period commencing on __________
and ending December 31, ___________, unless sooner terminated as hereinafter
provided. The Agreement shall thereafter continue in effect for subsequent one
(1) year terms, commencing January 1, unless altered or terminated as
hereinafter provided; provided, however, that following a Change of Control, as
defined in Section 5.6, the Employment Term shall continue for no less than one
(1) additional year. The period of Employee's employment hereunder, including
any extension or extensions pursuant to the foregoing sentence, from the date of
commencement until the date of expiration or termination of this Agreement, is
referred to hereinafter as the "Employment Term."
<PAGE>
ARTICLE 3
DUTIES AND AUTHORITY
Employee agrees, unless otherwise specifically authorized by the Company,
to devote substantially all of his business time and effort to his duties for
the profit, benefit and advantage of the business of the Company, except that
Employee may serve on the boards of directors of other business corporations
that have no business relationship with the Company and which do not compete
with the Company. In performing his duties hereunder, Employee shall have the
authorities customarily held by others holding positions similar to those
assigned to Employee in similar businesses, subject to the general and customary
supervision of the Company's Board of Directors and Chief Executive Officer.
ARTICLE 4
COMPENSATION
4.1 Base Salary. The Company agrees to pay Employee a base salary of
-----------
__________ Dollars ($_____________) per year, payable at the usual times for the
payment of the Company's executive employees, subject to adjustment as provided
herein. Employee's base salary shall be reviewed at least annually and may be
increased, but not decreased, consistent with general salary increases for the
Company's executive employees or as appropriate in light of the performance of
Employee and the Company. Notwithstanding anything herein to the contrary,
Employee's base salary may be reduced in the event of an across-the-board salary
reduction for all executive officers; provided, however, that the percentage
reduction of Employee's base salary shall not exceed the highest percentage
reduction in base salary of any other executive officer.
4.2 Incentive Compensation. Employee shall participate in the Company's
----------------------
incentive compensation plans for executive officers of the Company, as in effect
from time to time during the Employment Term. The Company shall adopt an annual
incentive program for executive officers of the Company that will provide for a
performance based cash bonus of an amount to be determined by the Board of
Directors of the Company (the "Annual Bonus") (the target of which shall be
____% of the Employee's base salary and the maximum of which shall not exceed
___% of the Employee's base salary).
4.3 Employee Benefits. Employee shall be eligible to participate in such
-----------------
other of the Company's employee benefit plans and to receive such benefits for
which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term;
provided, however, that Employee shall be entitled to four weeks of vacation
during the initial term of this Agreement and during the term of each extension
hereof.
-2-
<PAGE>
ARTICLE 5
TERMINATION
5.1 Termination by the Company Without Cause; Termination by Employee for
---------------------------------------------------------------------
Good Reason.
- -----------
(a) The Company shall have the right to terminate this Agreement
without Cause (as defined below) upon ninety (90) days' notice to Employee.
If Employee's employment hereunder is terminated by the Company without
Cause or by Employee for "Good Reason" (as defined below) (other than a
termination involving a Change of Control or by reason of death or
disability), the Company shall pay Employee at the time of such termination
in a lump sum a cash amount equal to _____ percent of his annual base
salary in effect immediately preceding such termination.
(b) For purposes of this Agreement, "Good Reason" shall mean:
(i) A material reduction in Employee's responsibilities,
authorities, or duties;
(ii) Employee's job is eliminated other than by reason of
promotion or termination for Cause;
(iii) The Company fails to pay Employee any amount otherwise
vested and due hereunder or under any plan or policy of the Company,
which failure is not cured within five (5) business days of receipt by
the Company of written notice from Employee which describes in
reasonable detail the amount which is due;
(iv) A material reduction in Employee's base salary except in the
event of an across-the-board salary reduction for all executive
officers;
(v) A material reduction in Employee's aggregate level of
benefits under the Company's pension, life insurance, medical, health
and accident, disability, deferred compensation or savings or similar
plans, except in the event of an across-the-board reduction in such
benefits for all executive officers;
(vi) A material reduction in Employee's reasonable opportunity to
earn incentive compensation under any plan in which Employee is a
participant, except in the event of an across-the-board reduction in
such benefits for all executive officers;
(vii) Employee's office is relocated outside of a 50 mile radius
of ________________ without his written consent;
(viii) The Company and its successor(s) (as described in
subparagraph (ix) below) shall discontinue the business of the
Company; or
-3-
<PAGE>
(ix) The failure of the Company to obtain an agreement to
expressly assume this Agreement from any successor to the Company
(whether such succession is direct or indirect by purchase, merger,
consolidation or otherwise, to substantially all of the business
and/or assets of the Company or a controlling portion of the Company's
stock).
Solely for the purposes of Section 5.6, any good faith determination of
Good Reason made by the Employee shall be conclusive.
5.2 Termination by the Company for Cause; Voluntary Termination by
--------------------------------------------------------------
Employee. Employee's employment hereunder may be terminated by the Company for
- --------
"Cause." For purposes of this Agreement, "Cause" shall mean (i) Employee's
willful and continued failure substantially to perform his duties hereunder for
a period of fifteen (15) days after written notice to Employee by the Company of
each such failure; (ii) Employee's dishonesty in the performance of his duties
hereunder; or (iii) Employee's conviction of a felony under the laws of the
United States or any state thereof. Employee shall have the right to voluntarily
terminate this Agreement upon ninety (90) days' notice to the Company. If
Employee is terminated for Cause, or if Employee voluntarily terminates
employment hereunder other than for Good Reason, he shall be entitled to receive
his base salary through the date of termination. All other benefits, if any,
payable to Employee following such termination of Employee's employment shall be
determined in accordance with the plans, policies and practices of the Company.
5.3 Notice of Termination. Any termination by the Company or by the
---------------------
Employee shall be communicated by Notice of Termination to the other party
hereto given in accordance with Article 18 of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Termination Date
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Employee or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the Company, respectively,
from asserting such fact or circumstance in enforcing the Employee's or the
Company's rights hereunder.
5.4 Termination Date. "Termination Date" means the date of receipt of the
----------------
Notice of Termination or any later date specified therein, as the case may be.
5.5 Termination by Death or Disability. Upon termination of Employee's
----------------------------------
employment due to death of Employee, Employee shall be entitled to his base
salary at the rate in effect at the time of Employee's death through the end of
the month in which his death occurs. Employee's employment hereunder may be
terminated by the Company if Employee becomes physically or
-4-
<PAGE>
mentally incapacitated and is therefore unable for a period of one hundred
eighty (180) consecutive days to perform his duties (such incapacity is
hereinafter referred to as "Disability"). Upon any such termination for
Disability, Employee shall be entitled to receive payment of disability benefits
in lieu of salary under the Company's Employee benefit plans as then in effect.
5.6 Termination Following a Change of Control; Benefits.
---------------------------------------------------
(a) In the event there is a Termination Following a Change of Control,
the Agreement shall terminate and Employee shall be entitled to the
following severance benefits:
(i) _____ percent of Employee's annual base salary at the rate
in effect immediately prior to the Change of Control or on the
Termination Date, whichever is higher, payable in a lump sum within
sixty (60) days after the Termination Date;
(ii) _____ percent of the higher of (x) the Employee's target
bonus in effect immediately prior to the Change of Control (or on the
Termination Date, whichever is higher) or (y) the Annual Bonus paid or
payable for the most recently completed fiscal year during the
Employment Term, if any (such higher amount being referred to as the
"Highest Annual Bonus").
(iii) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to Employee any other amounts or
benefits required to be paid or provided or which Employee is eligible
to receive under any plan, program, policy, practice, contract or
agreement of the Company (other than severance pay) to the same extent
that Employee would be eligible therefor if he were employed on a
full-time basis by the Company in the capacity provided for herein for
a period of _____ months after the Termination Date, including
receiving the full benefit of ____ months of employment at the income
levels provided for herein for purposes of any retirement plan
utilizing years of service as a criteria in the provision of benefits
(such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); provided, however, that to the extent Employee,
following the Termination Date, becomes employed by another employer
and becomes entitled to receive health insurance benefits from such
employer, the Company's obligation to provide such health insurance
benefits hereunder shall be decreased;
(iv) All accrued compensation (including base salary and
Highest Annual Bonus, each prorated through the Termination Date) and
unreimbursed expenses through the Termination Date. Such amounts shall
be paid to Employee in a lump sum in cash within thirty (30) days
after the Termination Date.
(v) The Employee shall be free to accept other employment
following such Termination, and, except as provided herein, there
shall be no offset of any
-5-
<PAGE>
employment compensation earned by the Employee in such other
employment during such period against payments due Employee hereunder,
and there shall be no offset in any compensation received from such
other employment against the continued salary set forth above.
(b) For purposes of this Section 5.6, the following terms shall have
the meanings set forth below:
(i) A "Change in Control" of the Company shall mean and shall be
deemed to have occurred if any of the following events shall have
occurred:
(a) Any person (as defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities
of the Company (not including in the securities beneficially
owned by such person any securities acquired directly from the
Company or its affiliates) representing 30% or more of the
combined voting power of the Company's then outstanding
securities, excluding any person who becomes such a beneficial
owner in connection with a transaction described in clause (i) of
paragraph (c) below; or
(b) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (___) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously
so approved or recommended; or
(c) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof) at least 55% of the combined voting power of
the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company
-6-
<PAGE>
(or similar transaction) in which no person is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by
such person any securities acquired directly from the Company or
its affiliates) representing 30% or more of the combined voting
power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least
60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially
the same proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of
transactions.
(ii) "Termination Following a Change of Control" shall mean a
Termination of the Employee without Cause by the Company in connection
with or within two years following a Change of Control or a
termination by the Employee for Good Reason of the Employee's
employment with the Company within two years following a Change of
Control.
(iii) "Cause" shall mean:
(a) Misfeasance or nonfeasance by the Employee in the
performance of his duties under this Agreement intended to injure
the Company which has a material adverse effect on the Company's
business or operations, if such failure is not remedied or
reasonable steps to effect such remedy are not commenced within
thirty (30) days after written notice of such violation; or
(b) Employee's conviction of a felony or any crime
involving moral turpitude.
-7-
<PAGE>
5.7 Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 5.7) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or
any interest or penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 5.7(a), if it shall be determined that
the Employee is entitled to a Gross-Up Payment, but that the Employee,
after taking into account the Payments and the Gross-Up Payment, would not
receive a net after-tax benefit of at least $10,000 (taking into account
both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Employee resulting from an elimination of the Gross-Up
Payment and a reduction of the Payments, in the aggregate, to an amount
(the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Employee and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(b) Subject to the provisions of Section 5.7(c), all determinations
required to be made under this Section 5.7, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by Price Waterhouse LLP or such other certified public accounting firm
as may be designated by the Employee (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within fifteen (15) business days of the receipt of notice from
the Employee that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 5.7, shall be paid by the Company to the Employee within five
(5) days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made
-8-
<PAGE>
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 5.7(c) and the Employee thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after the
Employee is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested
to be paid. The Employee shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period that it desires
to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5.7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Employee to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
-9-
<PAGE>
shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Employee, on an interest-free basis and
shall indemnify and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Employee shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 5.7(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 5.7(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Employee of an amount advanced by the Company
pursuant to Section 5.7(c), a determination is made that the Employee shall
not be entitled to any refund with respect to such claim and the Company
does not notify the Employee in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
ARTICLE 6
INSURANCE
Employee agrees that the Company may, from time to time, apply for and take
out in its own name and at its own expense, life, health, accident, or other
insurance upon Employee that the Company may deem necessary or advisable to
protect its interests hereunder; and Employee agrees to submit to any medical or
other examination necessary for such purposes and to assist and cooperate with
the Company in preparing such insurance; and Employee agrees that he shall have
no right, title, or interest in or to such insurance.
ARTICLE 7
FACILITIES AND EXPENSES
The Company shall make available to Employee such office space, secretarial
services, office equipment and furnishings as are suitable and appropriate to
Employee's title and duties. The Company shall promptly reimburse Employee for
all reasonable expenses incurred in the performance of his duties hereunder,
including without limitation, expenses for entertainment, travel,
-10-
<PAGE>
management seminars and use of the telephone, subject to the Company's
reasonable requirements with respect to the reporting and documentation of such
expenses.
ARTICLE 8
NONCOMPETITION
8.1 Necessity of Covenant. The Company and Employee acknowledge that:
---------------------
(a) The Company's business is highly competitive;
(b) The Company maintains confidential information and trade secrets
as described in Article 9, all of which are zealously protected and kept
secret by the Company;
(c) In the course of his employment, Employee will acquire certain of
the information described in Article 9 and the Company would be adversely
affected if such information subsequently, and in the event of the
termination of Employee's employment, is used for the purposes of competing
with the Company;
(d) The Company transacts business throughout the world; and
(e) For these reasons, both the Company and Employee further
acknowledge and agree that the restrictions contained herein are reasonable
and necessary for the protection of their respective legitimate interests
and that any violation of these restrictions would cause substantial injury
to the Company.
8.2 Covenant Not to Compete. Employee agrees that from and after the date
-----------------------
hereof during the Employment Term and for a period of one (1) year after the end
of the Employment Term, he will not, without the express written permission of
the Company, which may be given or withheld in the Company's sole discretion,
directly or indirectly own, manage, operate, control, lend money to, endorse the
obligations of, or participate or be connected as an officer, director, 5% or
more stockholder of a publicly-held company, stockholder of a closely-held
company, employee, partner, or otherwise, with any enterprise or individual
engaged in a business which is competitive with the Platinum Group Metals
business conducted by the Company. It is understood and acknowledged by both
parties that, inasmuch as the Company transacts business worldwide, this
covenant not to compete shall be enforced throughout the United States and in
any other country in which the Company is doing business as of the date of
Employee's termination of employment.
8.3 Disclosure of Outside Activities. Employee, during the term of his
--------------------------------
employment by the Company, shall at all times keep the Company informed of any
outside business activity and employment, and shall not engage in any outside
business activity or employment which may be in conflict with the Company's
interests.
-11-
<PAGE>
8.4 Survival. The terms of this Article 8 shall survive the expiration or
--------
termination of this Agreement for any reason.
ARTICLE 9
CONFIDENTIAL INFORMATION AND TRADE SECRETS
9.1 Nondisclosure of Confidential Information. Employee has acquired and
-----------------------------------------
will acquire certain "Confidential Information" of the Company. "Confidential
Information" shall mean any information that is not generally known, including
trade secrets, outside the Company and that is proprietary to the Company,
relating to any phase of the Company's existing or reasonably foreseeable
business which is disclosed to Employee by the Company including information
conceived, discovered or developed by Employee. Confidential Information
includes, but shall not be limited to, business plans, financial statements and
projections, operating forms (including contracts) and procedures, payroll and
personnel records, marketing materials and plans, proposals, software codes and
computer programs, project lists, project files, price information and cost
information and any other document or information that is designated by the
Company as "Confidential." The term "trade secret" shall be defined as follows:
A trade secret may consist of any formula, pattern, device or compilation
of information which is used in one's business, and which provides to the
holder an opportunity to obtain an advantage over competitors who do not
know or use it.
Accordingly, employee agrees that he shall not, during the Employment Term and
for three (3) years thereafter, use for his own benefit such Confidential
Information or trade secrets acquired during the term of his employment by the
Company. Further, during the Employment Term and for three (3) years
thereafter, Employee shall not, without the written consent of the Board of
Directors of the Company or a person duly authorized thereby, which consent may
be given or withheld in the Company's sole discretion, disclose to any person,
other than an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by
Employee of his duties, any Confidential Information or trade secrets obtained
by him while in the employ of the Company.
9.2 Return of Confidential Information. Upon termination of employment,
----------------------------------
Employee agrees to deliver to the Company all materials that include
Confidential Information or trade secrets, and all other materials of a
confidential nature which belong to or relate to the business of the Company.
9.3 Exceptions. The restrictions and obligations in Section 9.1 shall not
----------
apply with respect to any Confidential Information which: (i) is or becomes
generally available to the public through any means other than a breach by
Employee of his obligations under this Agreement; (ii) is disclosed to Employee
without obligation of confidentiality by a third party who has the right to make
such disclosure; (iii) is developed independently by Employee without use of or
benefit from the Confidential Information; (iv) was in possession of Employee
without obligations of
-12-
<PAGE>
confidentiality prior to receipt under this Agreement; or (v) is required to be
disclosed to enforce rights under this Agreement.
9.4 Survival. The terms of this Article 9 shall survive the expiration or
--------
termination of this Agreement for any reason.
JUDICIAL CONSTRUCTION
Employee believes and acknowledges that the provisions contained in this
Agreement, including the covenants contained in Articles 8 and 9 of this
Agreement, are fair and reasonable. Nonetheless, it is agreed that if a court
finds any of these provisions to be invalid in whole or in part under the laws
of any state, such finding shall not invalidate the covenants, nor the Agreement
in its entirety, but rather the covenants shall be construed and/or blue-lined,
reformed or rewritten by the court as if the most restrictive covenants
permissible under applicable law were contained herein.
ARTICLE 10
RIGHT TO INJUNCTIVE RELIEF
Employee acknowledges that a breach by Employee of any of the terms of
Articles 8 or 9 of this Agreement will render irreparable harm to the Company,
and that in the event of such breach the Company shall therefore be entitled to
any and all equitable relief, including, but not limited to, injunctive relief,
and to any other remedy that may be available under any applicable law or
agreement between the parties.
ARTICLE 11
CESSATION OF CORPORATE BUSINESS
This Agreement shall cease and terminate if the Company shall discontinue
its business, and all rights and liabilities hereunder shall cease, except as
provided in Section 5.6 and Article 13.
ARTICLE 12
ASSIGNMENT
12.1 Permitted Assignment. Subject to the provisions of Section 5.6, the
--------------------
Company shall have the right to assign this contract to its successors or
assigns, and all covenants or agreements hereunder shall inure to the benefit of
and be enforceable by or against its successors or assigns.
12.2 Successors and Assigns. The terms "successors" and "assigns" shall
----------------------
mean any person or entity which buys all or substantially all of the Company's
assets, or a controlling portion of its stock, or with which it merges or
consolidates.
-13-
<PAGE>
ARTICLE 13
FAILURE TO DEMAND, PERFORMANCE AND WAIVER
The failure by either party to demand strict performance and compliance
with any part of this Agreement during the Employment Term shall not be deemed
to be a waiver of the rights of such party under this Agreement or by operation
of law. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof.
ARTICLE 14
ENTIRE AGREEMENT
The Company and Employee acknowledge that this Agreement contains the full
and complete agreement between and among the parties, that there are no oral or
implied agreements or other modifications not specifically set forth herein, and
that this Agreement supersedes any prior agreements or understandings, if any,
between the Company and Employee, whether written or oral. The parties further
agree that no modifications of this Agreement may be made except by means of a
written agreement or memorandum signed by the parties.
ARTICLE 15
GOVERNING LAW
The parties hereby agree that this Agreement shall be construed in
accordance with the laws of the State of Colorado, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
ARTICLE 16
ATTORNEYS' FEES
Prior to a Change of Control, if either party shall commence any action or
proceeding against the other that arises out of the provisions hereof, or to
recover damages as the result of the alleged breach of any of the provisions
hereof, the prevailing party therein shall be entitled to recover all costs
incurred in connection therewith, including reasonable attorneys' fees.
Following a Change of Control, should a dispute arise under this Agreement, or
any action or proceeding be commenced to recover damages as a result of an
alleged breach of the terms of this Agreement, the Company shall be required to
pay the costs of Employee incurred in connection therewith, including reasonable
attorneys' fees.
ARTICLE 17
NOTICE
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
-14-
<PAGE>
If to the Employee:
________________
________________
________________
If to the Company:
Vice President, Human Resources
Stillwater Mining Company
HC 54 Box 365
Nye, Montana 59061
ARTICLE 18
COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the Company has hereunto signed its name and Employee
hereunder has signed his name, all as of the day and year first-above written.
STILLWATER MINING COMPANY
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
EMPLOYEE
_______________________________________________
_______________________________________________
-15-
<PAGE>
EXHIBIT 10.3
MASTER LEASE AGREEMENT
dated as of September 10, 1998 ("AGREEMENT")
THIS AGREEMENT, is between GENERAL ELECTRIC CAPITAL CORPORATION its
successors and assigns, if any ("LESSOR") and STILLWATER MINING COMPANY
("LESSEE"). Lessor has an office at 4 NORTH PARK DRIVE SUITE 500, HUNT
VALLEY, MD 21030. Lessee is a corporation organized and existing under the laws
of the State of Delaware. Lessee's mailing address and chief place of business
is 717 17/TH/ STREET, SUITE 1480, DENVER, CO 80202. This Agreement contains the
general terms that apply to the leasing of Equipment from Lessor to Lessee.
Additional terms that apply to the Equipment (term, rent, options, etc.) shall
be contained on a schedule ("SCHEDULE"). A form of the Schedule is attached.
1. LEASING
(a) Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment ("EQUIPMENT") described in any Schedule signed by both
parties.
(b) Lessor shall purchase Equipment from the manufacturer or supplier
("SUPPLIER") and lease it to Lessee when Lessor receives (i) a Schedule for the
Equipment, (ii) evidence of insurance which complies with the requirements of
Section 9, and (iii) such other documents as Lessor may reasonably request.
Each of the documents required above must be in form and substance satisfactory
to Lessor. Lessor hereby appoints Lessee its agent for inspection and acceptance
of the Equipment from the Supplier. Once the Schedule is signed, the Lessee may
not cancel the Schedule.
2. TERM, RENT AND PAYMENT
(a) The rent payable for the Equipment and Lessee's right to use the
Equipment shall begin on the earlier of (i) the date when the Lessee signs the
Schedule and accepts the Equipment or (ii) when Lessee has accepted the
Equipment under a Certificate of Acceptance ("LEASE COMMENCEMENT DATE"). The
term of this Agreement shall be the period specified in the applicable Schedule.
The word "term" shall include all basic and any renewal terms.
(b) Lessee shall pay rent to Lessor at its address stated above, except
as otherwise directed by Lessor. Rent payments shall be in the amount set forth
in, and due as stated in the applicable Schedule. If any Advance Rent (as
stated in the Schedule) is payable, it shall be due when the Lessee signs the
Schedule. Advance Rent shall be applied to the first rent payment and the
balance, if any, to the final rent payment(s) under such Schedule. In no event
shall any Advance Rent or any other rent payments be refunded to Lessee. If
rent is not paid within ten (10) days of its due date, Lessee agrees to pay a
late charge of five cents ($.05) per dollar on, and in addition to, the amount
of such rent but not exceeding the lawful maximum, if any.
(c) Lessor shall not disturb Lessee's quiet enjoyment of the Equipment
during the term of the Agreement unless a default has occurred and is continuing
under this Agreement.
3. RENT ADJUSTMENT
[ This section has been deleted in its entirety]
4. TAXES. If permitted by law, Lessee shall report and pay promptly all
taxes, fees and assessments due, imposed, assessed or levied against any
Equipment (or purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any rents or receipts hereunder), any
Schedule, Lessor or Lessee by any governmental entity or taxing authority during
or related to the term of this Agreement, including, without limitation, all
license and registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties and charges,
together with any penalties, fines or interest thereon (collectively "TAXES").
Lessee shall have no liability for Taxes imposed by the United States of America
or any state or political subdivision thereof which are on or measured by the
net income of Lessor except as provided in Sections 3 and 14(c). Lessee shall
promptly
<PAGE>
reimburse Lessor (on an after tax basis) for any Taxes charged to or assessed
against Lessor. Lessee shall show Lessor as the owner of the Equipment on all
tax reports or returns, and send Lessor a copy of each report or return and
evidence of Lessee's payment of Taxes upon request.
5. REPORTS
(a) If any tax or other lien shall attach to any Equipment, Lessee will
notify Lessor in writing, within ten (10) days after Lessee becomes aware of the
tax or lien. The notice shall include the full particulars of the tax or lien
and the location of such Equipment on the date of the notice.
(b) Lessee will deliver to Lessor, Lessee's complete financial
statements, certified by a recognized firm of certified public accountants
within ninety (90) days of the close of each fiscal year of Lessee. Lessee will
deliver to Lessor copies of Lessee's quarterly financial report certified by the
chief financial officer of Lessee, within ninety (90) days of the close of each
fiscal quarter of Lessee. Lessee will deliver to Lessor all Forms 10-K and 10-
Q, if any, filed with the Securities and Exchange Commission within thirty (30)
days after the date on which they are filed.
(c) Lessor may inspect any Equipment during normal business hours after
giving Lessee reasonable prior notice.
(d) Lessee will keep the Equipment at the Equipment Location (specified
in the applicable Schedule) and will give Lessor prior written notice of any
relocation of Equipment. If Lessor asks, Lessee will promptly notify Lessor in
writing of the location of any Equipment.
(e) If any Equipment is lost or damaged (where the estimated repair costs
would exceed the greater of ten percent (10%) of the original Equipment cost or
ten thousand and 00/100 dollars ($10,000)), or is otherwise involved in an
accident causing personal injury or property damage, Lessee will promptly and
fully report the event to Lessor in writing.
(f) Lessee will furnish a certificate of an authorized officer of Lessee
stating that he has reviewed the activities of Lessee and that, to the best of
his knowledge, there exists no default or event which with notice or lapse of
time (or both) would become such a default within thirty (30) days after any
request by Lessor.
6. DELIVERY, USE AND OPERATION
(a) All Equipment shall be shipped directly from the Supplier to Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable laws,
regulations and insurance policies and Lessee shall not discontinue use of the
Equipment.
(c) Lessee will not move any equipment from the location specified on the
Schedule, without the prior written consent of Lessor.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.
7. MAINTENANCE
(a) Lessee will, at its sole expense, maintain each unit of Equipment in
good operating order and repair, normal wear and tear excepted. The Lessee
shall also maintain the Equipment in accordance with manufacturer's
recommendations. Lessee shall make all alterations or modifications required to
comply with any applicable law, rule or regulation during the term of this
Agreement. If Lessor requests, Lessee shall affix plates, tags or other
identifying labels showing ownership thereof by Lessor. The tags or labels
shall be placed in a prominent position on each unit of Equipment.
(b) Lessee will not attach or install anything on any Equipment that will
impair the originally intended function or use of such Equipment without the
prior consent of Lessor. All additions, parts, supplies, accessories, and
equipment ("ADDITIONS") furnished or attached to any Equipment that are not
readily removable shall become the property of Lessor. All Additions shall be
made only in compliance with applicable law. Lessee will not attach or install
any Equipment to or in any other personal or real property without the prior
written consent of Lessor.
<PAGE>
8. STIPULATED LOSS VALUE
If for any reason any unit of Equipment becomes worn out, lost, stolen,
destroyed, irreparably damaged or unusable ("CASUALTY OCCURRENCES") Lessee shall
promptly and fully notify Lessor in writing. Lessee shall pay Lessor the sum of
(x) the Stipulated Loss Value (see Schedule) of the affected unit determined as
of the rent payment date prior to the Casualty Occurrence; and (y) all rent and
other amounts which are then due under this Agreement on the Payment Date
(defined below) for the affected unit. The Payment Date shall be the next rent
payment date after the Casualty Occurrence. Upon Payment of all sums due
hereunder, the term of this lease as to such unit shall terminate.
9. INSURANCE
(a) Lessee shall bear the entire risk of any loss, theft, damage to, or
destruction of, any unit of Equipment from any cause whatsoever from the time
the Equipment is shipped to Lessee.
(b) Lessee agrees, at its own expense, to keep all Equipment insured for
such amounts and against such hazards as Lessor may reasonably require. All such
policies shall be with companies, and on terms, reasonably satisfactory to
Lessor. The insurance shall include coverage for damage to or loss of the
Equipment, liability for personal injuries, death or property damage. Lessor
shall be named as additional insured with a loss payable clause in favor of
Lessor, as its interest may appear, irrespective of any breach of warranty or
other act or omission of Lessee. The insurance shall provide for liability
coverage in an amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00)
total liability per occurrence, unless otherwise stated in any Schedule. The
casualty/property damage coverage shall be in an amount equal to the higher of
the Stipulated Loss Value or the full replacement cost of the Equipment. No
insurance shall be subject to any co-insurance clause. The insurance policies
may not be altered or canceled by the insurer until after thirty (30) days
written notice to Lessor. Lessee agrees to deliver to Lessor evidence of
insurance reasonably satisfactory to Lessor.
(c) Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make
proof of loss and claim for insurance, and to make adjustments with insurers and
to receive payment of and execute or endorse all documents, checks or drafts in
connection with insurance payments. Lessor shall not act as Lessee's attorney-
in-fact unless Lessee is in default. Lessee shall pay any reasonable expenses
of Lessor in adjusting or collecting insurance. Lessee will not make
adjustments with insurers except with respect to claims for damage to any unit
of Equipment where the repair costs are less than the lesser of ten percent
(10%) of the original Equipment cost or two hundred thousand and 00/100
dollars$200,000). Lessor may, at its option, apply proceeds of insurance, in
whole or in part, to (i) repair or replace Equipment or any portion thereof, or
(ii) satisfy any obligation of Lessee to Lessor under this Agreement.
10. RETURN OF EQUIPMENT
(a) At the expiration or termination of this Agreement or any Schedule,
Lessee shall perform any testing and repairs required to place the units of
Equipment in the same condition and appearance as when received by Lessee
(reasonable wear and tear excepted) and in good working order for the original
intended purpose of the Equipment. If required the units of Equipment shall be
deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is reasonably satisfactory to
Lessor. Lessee shall remove installed markings that are not necessary for the
operation, maintenance or repair of the Equipment. All Equipment will be
cleaned, cosmetically acceptable, and in such condition as to be immediately
installed into use in a similar environment for which the Equipment was
originally intended to be used. All waste material and fluid must be removed
from the Equipment and disposed of in accordance with then current waste
disposal laws. Lessee shall return the units of Equipment to a location within
the continental United States as Lessor shall direct. Lessee shall obtain and
pay for a policy of transit insurance for the redelivery period in an amount
equal to the replacement value of the Equipment. The transit insurance must
name Lessor as the loss payee. The Lessee shall pay for all costs to comply
with this section (a).
(b) Until Lessee has fully complied with the requirements of Section
10(a) above, Lessee's rent payment obligation and all other obligations under
this Agreement shall continue from month to month notwithstanding any expiration
or termination of the lease term. Lessor may terminate the Lessee's right to
use the Equipment upon ten (10) days notice to Lessee.
(c) Lessee shall provide to Lessor a detailed inventory of all components
of the Equipment including model and serial numbers. Lessee shall also provide
an up-to-date copy of all other documentation pertaining to the Equipment. All
service manuals, blue prints, process flow diagrams, operating manuals,
inventory and maintenance records shall be given to Lessor at least ninety (90)
days and not more than one hundred twenty (120) days prior to lease termination.
<PAGE>
(d) Lessee shall make the Equipment available for on-site operational
inspections by potential purchasers at least one hundred twenty (120) days prior
to and continuing up to lease termination. Lessor shall provide Lessee with
reasonable notice prior to any inspection. Lessee shall provide personnel,
power and other requirements necessary to demonstrate electrical, hydraulic and
mechanical systems for each item of Equipment.
11. DEFAULT AND REMEDIES
(a) Lessor may in writing declare this Agreement in default if: (1) (A)
Lessee breaches its obligation to pay rent when due and fails to cure the breach
within ten (10) days;( B) or if Lessee breaches its obligations to pay any other
sums due ( other than rent) hereunder and fails to cure the breach within thirty
(30) days after written notice from Lessor 2) Lessee breaches any of its
insurance obligations under Section 9; (3) Lessee breaches any of its other
obligations and fails to cure that breach within thirty (30) days after written
notice from Lessor; (4) any representation or warranty made by Lessee in
connection with this Agreement shall be false or misleading in any material
respect; (5) Lessee becomes insolvent or ceases to do business as a going
concern; (6) any Equipment is illegally used; or (7) a petition is filed by or
against Lessee or any Guarantor of Lessee's obligations to Lessor under any
bankruptcy or insolvency laws and in the event of an involuntary petition, the
petition is not dismissed within forty-five (45) days of the filing date. The
default declaration shall apply to all Schedules unless specifically excepted by
Lessor.
(b) After a default, at the request of Lessor, Lessee shall comply with
the provisions of Section 10(a). Lessee hereby authorizes Lessor to peacefully
enter any premises where any Equipment may be and take possession of the
Equipment. Lessee shall immediately pay to Lessor without further demand as
liquidated damages for loss of a bargain and not as a penalty, the Stipulated
Loss Value of the Equipment (calculated as of the rent date next preceding the
declaration of default), and all rents and other sums then due under this
Agreement and all Schedules. Lessor may terminate this Agreement as to any or
all of the Equipment. A termination shall occur only upon written notice by
Lessor to Lessee and only as to the units of Equipment specified in any such
notice. Lessor may, but shall not be required to, sell Equipment at private or
public sale, in bulk or in parcels, with or without notice, and without having
the Equipment present at the place of sale. Lessor may also, but shall not be
required to, lease, otherwise dispose of or keep idle all or part of the
Equipment. Lessor may use Lessee's premises for a reasonable period of time for
any or all of the purposes stated above without liability for rent, costs,
damages or otherwise. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (1) to pay all of
Lessor's costs, charges and expenses incurred in taking, removing, holding,
repairing and selling, leasing or otherwise disposing of Equipment; then, (2) to
the extent not previously paid by Lessee, to pay Lessor all sums due from Lessee
under this Agreement; then (3) to reimburse to Lessee any sums previously paid
by Lessee as liquidated damages; and (4) any surplus shall be retained by
Lessor. Lessee shall immediately pay any deficiency in (1) and (2) above .
(c) The foregoing remedies are cumulative, and any or all thereof may be
exercised instead of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition
(and the time and place thereof), and the manner and place of any advertising.
Lessee shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
under this Agreement, or if prohibited by law, such lesser sum as may be
permitted. Waiver of any default shall not be a waiver of any other or
subsequent default.
(d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.
12. ASSIGNMENT: LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, ENCUMBER OR SUBLET
ANY EQUIPMENT OR THE INTEREST OF LESSEE IN THE EQUIPMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR. Lessor may, without the consent of Lessee, assign
this Agreement, any Schedule or the right to enter into a Schedule. Lessee
agrees that if Lessee receives written notice of an assignment from Lessor,
Lessee will pay all rent and all other amounts payable under any assigned
Schedule to such assignee or as instructed by Lessor. Lessee also agrees to
confirm in writing receipt of the notice of assignment as may be reasonably
requested by assignee. Lessee hereby waives and agrees not to assert against
any such assignee any defense, set-off, recoupment claim or counterclaim which
Lessee has or may at any time have against Lessor for any reason whatsoever.
13. NET LEASE Lessee is unconditionally obligated to pay all rent and other
amounts due for the entire lease term no matter what happens, even if the
Equipment is damaged or destroyed, if it is defective or if Lessee no longer can
use it; provided, however, in the event of a Casualty Occurrence and Lessee's
payment of the Stipulated Loss Value of the affected item of Equipment and all
other amounts due under Section 8 hereof, Lessee's obligation to make future
payments with respect to such affected item shall terminate.. Lessee is not
entitled to reduce or set-off against rent or other amounts due to Lessor or to
anyone to whom Lessor assigns this Agreement or any Schedule whether Lessee's
claim arises out of this Agreement, any Schedule, any statement by Lessor,
Lessor's liability or any manufacturer's liability, strict liability, negligence
or otherwise.
<PAGE>
14. INDEMNIFICATION
(a) Lessee hereby agrees to indemnify Lessor, its agents, employees,
successors and assigns (on an after tax basis) from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature arising out of or relating to the
Equipment or this Agreement, except to the extent the losses, damages,
penalties, injuries, claims, actions, suits or expenses result from Lessor's
gross negligence or willful misconduct ("CLAIMS"). This indemnity shall
include, but is not limited to, Lessor's strict liability in tort and Claims,
arising out of (i) the selection, manufacture, purchase, acceptance or rejection
of Equipment, the ownership of Equipment during the term of this Agreement, and
the delivery, lease, possession, maintenance, uses, condition, return or
operation of Equipment (including, without limitation, latent and other defects,
whether or not discoverable by Lessor or Lessee and any claim for patent,
trademark or copyright infringement or environmental damage) or (ii) the
condition of Equipment sold or disposed of after use by Lessee, any sublessee or
employees of Lessee. Lessee shall, upon request, defend any actions based on,
or arising out of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that (i) on the
Lease Commencement Date for any unit of Equipment, such unit will qualify for
all of the items of deduction and credit specified in Section C of the
applicable Schedule ("TAX BENEFITS") in the hands of Lessor, and (ii) at no time
during the term of this Agreement will Lessee take or omit to take, nor will it
permit any sublessee or assignee to take or omit to take, any action (whether or
not such act or omission is otherwise permitted by Lessor or by this Agreement),
which will result in the disqualification of any Equipment for, or recapture of,
all or any portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warranty or
covenant of the Lessee contained in this Agreement or any Schedule (1) tax
counsel of Lessor shall determine that Lessor is not entitled to claim on its
Federal income tax return all or any portion of the Tax Benefits with respect to
any Equipment, or (2) any Tax Benefit claimed on the Federal income tax return
of Lessor is disallowed or adjusted by the Internal Revenue Service, or (3) any
Tax Benefit is recalculated or recaptured (any determination, disallowance,
adjustment, recalculation or recapture being a "LOSS"), then Lessee shall pay
to Lessor, as an indemnity and as additional rent, an amount that shall, in the
reasonable opinion of Lessor, cause Lessor's after-tax economic yields and cash
flows to equal the Net Economic Return that would have been realized by Lessor
if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount. The economic yields and cash flows shall be
computed on the same assumptions, including tax rates as were used by Lessor in
originally evaluating the transaction ("NET ECONOMIC RETURN"). If an adjustment
has been made under Section 3 then the Effective Rate used in the next preceding
adjustment shall be substituted.
(d) All references to Lessor in this Section 14 include Lessor and the
consolidated taxpayer group of which Lessor is a member. All of Lessor's rights,
privileges and indemnities contained in this Section 14 shall survive the
expiration or other termination of this Agreement. The rights, privileges and
indemnities contained herein are expressly made for the benefit of, and shall be
enforceable by Lessor, its successors and assigns.
15. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT
MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED UNDER THIS AGREEMENT OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE.
All such risks, as between Lessor and Lessee, are to be borne by Lessee.
Without limiting the foregoing, Lessor shall have no responsibility or liability
to Lessee or any other person with respect to any of the following (1) any
liability, loss or damage caused or alleged to be caused directly or indirectly
by any Equipment, any inadequacy thereof, any deficiency or defect (latent or
otherwise) of the Equipment, or any other circumstance in connection with the
Equipment; (2) the use, operation or performance of any Equipment or any risks
relating to it; (3) any interruption of service, loss of business or anticipated
profits or consequential damages; or (4) the delivery, operation, servicing,
maintenance, repair, improvement or replacement of any Equipment. If, and so
long as, no default exists under this Lease, Lessee shall be, and hereby is,
authorized during the term of this Lease to assert and enforce whatever claims
and rights Lessor may have against any Supplier of the Equipment at Lessee's
sole cost and expense, in the name of and for the account of Lessor and/or
Lessee, as their interests may appear.
16. REPRESENTATIONS AND WARRANTIES OF LESSEE Lessee makes each of the
following representations and warranties to Lessor on the date hereof and on the
date of execution of each Schedule.
<PAGE>
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "DOCUMENTS").
Lessee is duly qualified to do business wherever necessary to carry on its
present business and operations, including the jurisdiction(s) where the
Equipment is or is to be located.
(b) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies may be limited under applicable bankruptcy and insolvency laws.
(c) No approval, consent or withholding of objections is required from
any governmental authority or entity with respect to the entry into or
performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or bylaws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Equipment pursuant to
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Lessee, which if decided against Lessee will have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is and
will remain tangible personal property.
(g) Each financial statement delivered to Lessor has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of the most recent financial statement, there has been no
material adverse change.
(h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).
(i) The Equipment will at all times be used for commercial or business
purposes.
17. EARLY TERMINATION
[ This section has been deleted in its entirety]
18. PURCHASE OPTION
(a) Lessee may at lease expiration purchase all (but not less than all)
of the Equipment in any Schedule on an AS IS BASIS for cash equal to its then
Fair Market Value (plus all applicable sales taxes). Lessee must notify Lessor
of its intent to purchase the Equipment in writing at least one hundred eighty
(180) days in advance. If Lessee is in default or if the Lease has already been
terminated Lessee may not purchase the Equipment.
(b) "Fair Market Value" shall mean the price that a willing buyer (who is
neither a lessee in possession nor a used equipment dealer) would pay for the
Equipment in an arm's-length transaction to a willing seller under no compulsion
to sell. In determining the Fair Market Value the Equipment shall be assumed to
be in the condition in which it is required to be maintained and returned under
this Agreement. If the Equipment is installed it shall be valued on an
installed basis. The costs of removal from current location shall not be a
deduction from the value of the Equipment. If Lessor and Lessee are unable to
agree on the Fair Market Value at least one hundred thirty-five (135) days
before lease expiration, Lessor shall appoint an independent appraiser
(reasonably acceptable to Lessee) to determine Fair Market Value. The
independent appraiser's determination shall be final, binding and conclusive.
Lessee shall bear all costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it provides
Lessor with written notice of its irrevocable election to exercise the same
within fifteen (15) days after Fair Market Value is told to Lessee.
19. MISCELLANEOUS
(a) LESSEE AND LESSOR UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY
OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
<PAGE>
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
(b) The Equipment shall remain Lessor's property unless Lessee purchases
the Equipment from Lessor and until such time Lessee shall only have the right
to use the Equipment as a lessee. Any cancellation or termination by Lessor of
this Agreement, any Schedule, supplement or amendment hereto, or the lease of
any Equipment hereunder shall not release Lessee from any then outstanding
obligations to Lessor hereunder. All Equipment shall at all times remain
personal property of Lessor even though it may be attached to real property.
The Equipment shall not become part of any other property by reason of any
installation in, or attachment to, other real or personal property .
(c) Time is of the essence of this Agreement. Lessor's failure at any
time to require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right at any other time to demand strict
compliance with this Agreement. Lessee agrees, upon Lessor's request, to
execute any instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor. All notices required to be given hereunder
shall be deemed adequately given if sent by registered or certified mail to the
addressee at its address stated herein, or at such other place as such addressee
may have specified in writing. This Agreement and any Schedule and Annexes
thereto constitute the entire agreement of the parties with respect to the
subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY
WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING
AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
(d) If Lessee does not comply with any provision of this Agreement,
Lessor shall have the right, but shall not be obligated, to effect such
compliance, in whole or in part. All reasonable amounts spent and obligations
incurred or assumed by Lessor in effecting such compliance shall constitute
additional rent due to Lessor. Lessee shall pay the additional rent within five
days after the date Lessor sends notice to Lessee requesting payment. Lessor's
effecting such compliance shall not be a waiver of Lessee's default.
(e) Any rent or other amount not paid to Lessor when due shall bear
interest, from the due date until paid, at the lesser of eighteen percent (18%)
per annum or the maximum rate allowed by law. Any provisions in this Agreement
and any Schedule that are in conflict with any statute, law or applicable rule
shall be deemed omitted, modified or altered to conform thereto.
(f) Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no more
than ten percent (10%) within each Schedule to account for equipment change
orders, equipment returns, invoicing errors, and similar matters. Lessee
acknowledges and agrees that the rent shall be adjusted as a result of the
change in the Capitalized Lessor's Cost. Lessor shall send Lessee a written
notice stating the final Capitalized Lessor's Cost, if it has changed.
(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.
(h) Any cancellation or termination by Lessor, pursuant to the provision
of this Agreement, any Schedule, supplement or amendment hereto, of the lease of
any Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.
(i) To the extent that any Schedule would constitute chattel paper, as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction, no security interest therein may be created through the
transfer or possession of this Agreement in and of itself without the transfer
or possession of the original of a Schedule executed pursuant to this Agreement
and incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION STILLWATER MINING CO.
By: /S/ BOB LEE By: /s/ JAMES A. SABALA
------------------------------ -----------------------------
Name: Bob Lee Name: James A. Sabala
---------------------------- ---------------------------
Title: Credit Analyst Title: Vice President and CFO
--------------------------- --------------------------
<PAGE>
ADDENDUM NO. 1
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 10, 1998
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above referenced
lease (the "LEASE"), between GENERAL ELECTRIC CAPITAL CORPORATION ("LESSOR") and
STILLWATER MINING COMPANY ("LESSEE") and is hereby incorporated into the Lease
as though fully set forth therein. Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Lease.
The Lease is hereby amended as follows:
1. XXI. ADDITIONAL COVENANTS.
(a) At all times during the term of the Lease, Lessee shall
maintain: (i) a ratio of Total Liabilities to Tangible Net Worth of equal
to or less than 1.5 TO 1.0; (ii) A Fixed Charge Coverage Ratio of equal to
or greater than 2.0 to 1.0, (iii) effective March 31, 1999, Lessee must
have entered into supply contracts to supply a minimum of 80% of Lessee's
total annual expected palladium production for a minimum of five (5) years.
If Lessee ceases to satisfy any of such requirements, Lessee shall cause to
be delivered to Lessor an irrevocable standby letter of credit as described
in Section XXI(c) below or Lessee shall pay to Lessor a Termination Fee
equal to 100% of the Acquisition Cost on or before April 30, 1999. Tangible
Net Worth shall be defined as Total Stockholder's Equity minus Intangible
Assets plus all Debt which is contractually subordinate to this Lease
Agreement. The Fixed Charge Coverage Ratio, for purposes of this
calculation, will be Earnings before Interest, Taxes, Depreciation, and
Amortization divided by the sum of Current Portion of Long Term Debt,
Interest Expense and Preferred Dividends. Except as defined herein,
accounting terms used herein shall be as defined, and all calculations
hereunder shall be made, in accordance with GAAP.
(b) Lessee's chief financial officer or any other officer of
Lessee shall notify Lessor of the total supply contracts entered into by
Lessee by March 31, 1999 and shall certify that such amounts are in
compliance with the requirements of Section XXI(a) above, such notification
and certification shall be providedany time prior to March 31, 1999.
Lessee's chief financial officer or an officer of Lessee shall notify
Lessor the amount of Lessee's ratio of Total Liabilities to Tangible Net
Worth and Fixed Charge Coverage Ratio and shall certify that such amounts
are in compliance with the requirements of Section XXI(a) above such
notification and certification shall be provided within ninety (90) days of
the close of each fiscal quarter.
(c) The irrevocable standby letter of credit provided pursuant to
this addendum shall be (i) in the amount of the then Stipulated Loss Value
of all of the Equipment, (ii) issued by a bank which is acceptable to
Lessor in its sole discretion, (iii) in the form attached as Exhibit A or
as may be acceptable to Lessor in its sole discretion, and (iv) for an
initial term of six months with automatic semi-annual renewals thereafter
(without amendment except for extension of the then current expiration date
by an additional six months) until Lessee has received written notice from
Lessor to the effect that the Letter of Credit is being released in its
entirety. Lessee shall also execute a Letter of Credit Agreement in the
form attached as Exhibit B.
(d) If Lessee has provided the Letter of Credit as required
herein Lessor shall release the Letter of Credit if, (X)for twoquarters,
Lessee (i) is not in default under the Lease, and (ii) is in compliance
with the covenants stated herein and (Y) Lessee has entered into supply
contracts to supply a minimum of 80% of Lessee's total annual expected
palladium production for a minimum term of five (5) years. Lessee shall
also provide Lessor with a compliance certificate indicating that the
Lessee is in compliance with the required covenants. Upon the release of
the Letter of Credit the terms of this Section XXI are reinstated.
Except as expressly modified hereby, all terms and provisions of the Lease shall
remain in full force and effect. This Addendum is not binding nor effective
with respect to the Lease or the Equipment until executed on behalf of Lessor
and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be executed
by their duly authorized representatives as of the date first above written.
LESSEE: LESSOR:
STILLWATER MINING COMPANY GENERAL ELECTRIC CAPITAL CORPORATION
BY: /s/ JAMES A. SABALA BY: /s/ BOB LEE
------------------------------------ --------------------------------
ITS: Vice President and CFO ITS: Credit Analyst
----------------------------------- -------------------------------
DATED: September 11, 1998 DATED: September 14, 1998
--------------------------------- -----------------------------
ATTEST:
BY: /s/ LISA MAESTAS
--------------------------------
NAME: Lisa Maestas
------------------------------
<PAGE>
SLB/CS
MINING AND QUARRY EQUIPMENT SCHEDULE
SCHEDULE NO. 001
DATED THIS SEPTEMBER 10, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 10, 1998
LESSOR & MAILING ADDRESS: LESSEE & MAILING ADDRESS:
- -----------------------------------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION STILLWATER MINING COMPANY
4 NORTH PARK DRIVE SUITE 500 717 17/TH/ STREET SUITE 1480
HUNT VALLEY, MD 21030 DENVER, CO 80202
Capitalized terms not defined herein shall have the meanings assigned to them in
the Master Lease Agreement identified above ("AGREEMENT"; the Agreement as it
relates to this Schedule, together with this Schedule being collectively
referred to as "LEASE").
A. EQUIPMENT: Subject to the terms and conditions of the Lease, Lessor agrees
---------
to Lease to Lessee the Equipment described below (the "EQUIPMENT").
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER CAPITALIZED
OF UNITS LESSORS COST MANUFACTURER SERIAL NUMBER MODEL AND TYPE OF EQUIPMENT
-------- ------------ ------------ ------------- ---------------------------
</TABLE>
See Annex A attached hereto and forming a part hereof
Equipment immediately listed above is located at: 12 Miles South FS 205,
McLeod, Sweet Grass County, MT 59052
<TABLE>
<CAPTION>
B. FINANCIAL TERMS
<S> <C> <C> <C>
1. Advance Rent (if any): $95,283.83 5. Basic Term Commencement Date: September 11, 1998
2. Capitalized Lessor's Cost: $ 6,960,104.54 6. Lessee Federal Tax ID No.: 810480654
3. Basic Term (No. of Months): 84 Months. 7. Last Delivery Date: AUGUST 17, 1998
4. Basic Term Lease Rate Factor: 1.369% 8. Daily Lease Rate Factor: .0456
</TABLE>
9. First Termination Date: SEVENTY-TWO (72) months after the Basic Term
Commencement Date.
10. Interim Rent: For the period from and including the Lease Commencement
Date to but not including the Basic Term Commencement Date ("Interim
Period"), Lessee shall pay as rent ("Interim Rent") for each unit of
Equipment, the product of the Daily Lease Rate Factor times the
Capitalized Lessor's Cost of such unit times the number of days in the
Interim Period. Interim Rent shall be due on _N/A.
11. Basic Term Rent. Commencing on SEPTEMBER 11, 1998 and on the same day of
each month thereafter (each, a "Rent Payment Date") during the Basic
Term, Lessee shall pay as rent ("Basic Term Rent") the product of the
Basic Term Lease Rate Factor times the Capitalized Lessor's Cost of all
Equipment on this Schedule.
C. TAX BENEFITS Depreciation Deductions:
1. Depreciation method is the 200% declining balance method, switching to
straight line method for the 1st taxable year for which using the
straight line method with respect to the adjusted basis as of the
beginning of such year will yield a larger allowance
2. Recovery Period: SEVEN (7) YEARS.
3. Basis: 100% of Capitalized Lessors Cost.
<PAGE>
D. PROPERTY TAX
APPLICABLE TO EQUIPMENT LOCATED IN 12 MILES FS 205, MCLEOD, MT 59052:
Lessee agrees that it will (a) list all such Equipment, (b) report all
property taxes assessed against such Equipment and (c) pay all such
taxes when due directly to the appropriate taxing authority until Lessor
shall otherwise direct in writing. Upon request of Lessor, Lessee shall
promptly provide proof of filing and proof of payment to Lessor.
Lessor may notify Lessee (and Lessee agrees to follow such notification)
regarding any changes in property tax reporting and payment
responsibilities.
E. ARTICLE 2A NOTICE
IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 2A OF THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN THE APPLICABLE STATE, LESSOR HEREBY MAKES
THE FOLLOWING DISCLOSURES TO LESSEE PRIOR TO EXECUTION OF THE LEASE, (A)
THE PERSON(S) SUPPLYING THE EQUIPMENT IS SEE ANNEX A ATTACHED HERETO AND
FORMING A PART HEREOF (THE "SUPPLIER(S)"), (B) LESSEE IS ENTITLED TO THE
PROMISES AND WARRANTIES, INCLUDING THOSE OF ANY THIRD PARTY, PROVIDED TO
THE LESSOR BY SUPPLIER(S), WHICH IS SUPPLYING THE EQUIPMENT IN
CONNECTION WITH OR AS PART OF THE CONTRACT BY WHICH LESSOR ACQUIRED THE
EQUIPMENT AND (C) WITH RESPECT TO SUCH EQUIPMENT, LESSEE MAY COMMUNICATE
WITH SUPPLIER(S) AND RECEIVE AN ACCURATE AND COMPLETE STATEMENT OF SUCH
PROMISES AND WARRANTIES, INCLUDING ANY DISCLAIMERS AND LIMITATIONS OF
THEM OR OF REMEDIES. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE
HEREBY WAIVES ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE IN
ARTICLE 2A AND ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR
OTHERWISE WHICH MAY LIMIT OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES
UNDER THE DEFAULT AND REMEDIES SECTION OF THE AGREEMENT.
F. STIPULATED LOSS AND TERMINATION VALUE TABLE*
See Annex B attached hereto and forming a part hereof
*The Stipulated Loss Value or Termination Value for any unit of
Equipment shall be the Capitalized Lessor's Cost of such unit multiplied
by the appropriate percentage derived from the above table. In the event
that the Lease is for any reason extended, then the last percentage
figure shown above shall control throughout any such extended term.
G. MODIFICATIONS AND ADDITIONS FOR THIS SCHEDULE ONLY
For purposes of this Schedule only, the Agreement is amended as follows:
1. The LEASING Section subsection (b) of the Lease is hereby
deleted in its entirety and the following substituted in its stead:
b) The obligation of Lessor to purchase the Equipment from
Lessee and to lease the same to Lessee shall be subject to receipt by
Lessor, on or prior to the earlier of the Lease Commencement Date or
Last Delivery Date therefor, of each of the following documents in form
and substance satisfactory to Lessor: (i) evidence of insurance which
complies with the requirements of the INSURANCE Section of the Lease,
and (ii) such other documents as Lessor may reasonably request.
2. The DELIVERY, USE AND OPERATION Section subsection (a) of the
Lease shall be deleted and the following substituted in its stead:
The parties acknowledge that this is a sale/leaseback transaction and
the Equipment is in Lessee's possession as of the Lease Commencement
Date.
3. BILL OF SALE
Lessee, in consideration of the Lessor's payment of the amount
set forth in B 2. above, which includes any applicable sales taxes
(which payment Lessee acknowledges), hereby grants, sells, assigns,
transfers and delivers to Lessor the Equipment along with whatever
claims and rights Seller may have against the manufacturer and/or
Supplier of the Equipment, including but not limited to all warranties
and representations. At Lessors request Lessee will
<PAGE>
cause Supplier to deliver to Lessor a written statement wherein the Supplier (i)
consents to the assignment to Lessor of whatever claims and rights Lessee may
have against the Supplier, (ii) agrees not to retain any security interest, lien
or other encumbrance in or upon the Equipment at any time, and to execute such
documents as Lessor may request to evidence the release of any such encumbrance,
and (iii) represents and warrants to Lessor (x) that Supplier has previously
conveyed full title to the Equipment to Lessee, (y) that the Equipment was
delivered to Lessee and installation completed, and (z) that the final purchase
price of the Equipment (or a specified portion of such purchase price) has been
paid by Lessee.
Lessor is purchasing the Equipment for leasing back to Lessee pursuant
to the Lease. Lessee represents and warrants to Lessor that (i) Lessor will
acquire by the terms of this Bill of Sale good title to the Equipment free from
all liens and encumbrances whatsoever; (ii) Lessee has the right to sell the
Equipment; and (iii) the Equipment has been delivered to Lessee in good order
and condition, and conforms to the specifications, requirements and standards
applicable thereto; and (iv) the equipment has been accurately labeled,
consistent with the requirements of 40 CFR part 82 Subpart E, with respect to
products manufactured with a controlled (ozone-depleting) substance.
Lessee agrees to save and hold harmless Lessor from and against any and
all federal, state, municipal and local license fees and taxes of any kind or
nature, including, without limiting the generality of the foregoing, any and all
excise, personal property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions and suits
resulting therefrom and imposed upon, incurred by or asserted against Lessor as
a consequence of the sale of the Equipment to Lessor.
4. ACCEPTANCE
Pursuant to the provisions of the Lease, as it relates to this Schedule,
Lessee hereby certifies and warrants that (i) all Equipment listed above has
been delivered and installed (if applicable); (ii) Lessee has inspected the
Equipment, and all such testing as it deems necessary has been performed by
Lessee, Supplier or the manufacturer; and (iii) Lessee accepts the Equipment for
all purposes of the Lease, the purchase documents and all attendant documents.
Lessee does further certify that as of the date hereof (i) Lessee is not
in default under the Lease; (ii) the representations and warranties made by
Lessee pursuant to or under the Lease are true and correct on the date hereof
and (iii) Lessee has reviewed and approves of the purchase documents for the
Equipment, if any.
5. EQUIPMENT SPECIFIC PROVISIONS
The first sentence of the REPORTS Section subsection (d) of the Lease
shall be deleted in its entirety and the following substituted in its stead:
(d) Lessee will promptly notify Lessor in writing of a change in the
Equipment Location in the event that any unit of Equipment fails to return to
such location for a period of ninety (90) consecutive days.
The REPORTS Section of the Lease shall be amended by adding the
following as subsection (g) thereof:
(g) Lessee shall promptly notify Lessor of any malfunction of the hobbs
or hour meter.
The DELIVERY, USE AND OPERATION Section subsection (b) of the Lease
shall be amended to add the following sentence at the end thereof:
Lessee will allow only qualified, properly-licensed personnel selected,
employed and controlled by Lessee to operate the Equipment.
RETURN CONDITIONS: In addition to the provisions provided for in the
RETURN OF EQUIPMENT Section of the Lease, and provided that Lessee has elected
not to exercise its option to purchase the Equipment, Lessee shall, at its
expense, return the Equipment as specified below:
(a) General Condition: With respect to each unit, no glass shall be
broken, chipped or cracked, no upholstery shall have any cut, tear or burn,
there shall be no unrepaired damage to exterior or interior materials that
exceeds $250 and all decals, numbers, customer identification, glue and
adhesives shall have been removed from Equipment without damage to paint or
Equipment. Frame and structural members including but not limited to loader
arms, stick, booms, buckets, frame rails, all ground engaging tools and all
attachments will be structurally sound, without breaks, bends, cracks or missing
teeth. Cooling, heating and lubrication systems shall not be contaminated and
there shall be no leaking between systems. No battery shall have any dead cells,
cracked case or be inoperative. All units returned will be cleaned and
cosmetically acceptable, with all rust and corrosion properly removed and/or
treated. All material (i.e., dirt, refuse, asphalt, gravel, etc.) must be
properly removed from the Equipment and disposed of in accordance with all
applicable federal, state and local laws and regulations. All internal fluids
such as lube oil and hydraulic fluids are to be filled at operating levels and
all filler caps are to be secured.
<PAGE>
(b) Tires: All tires shall be of the same original size, type and
manufacturer (or similar quality manufacturer if the original manufacturer no
longer produces tires of that type) as upon delivery to Lessee. On each unit,
the tires shall have no missing or damaged parts or gouges. Also, all tires
shall have a minimum of fifty percent (50%) remaining wear.
(c) Mechanical Drive Train: If so equipped, the transmission/hydrostatic
drive systems including but not limited to differentials, final drives, will be
in good condition and operate quietly without vibrations or leaks.
(d) Electric Drive Train: If so equipped, the electric drive system
including, but not limited to alternators, generators, control systems,
motorized wheels, shall have at least fifty (50%) time/wear remaining before
next overhaul or replacement as recommended by the manufacturer and published in
standard maintenance manuals.
(e) Undercarriage: If so equipped, the undercarriage (including
sprockets, links, idlers, bogies, carrier and track rollers, pins and bushings,
track shoes/pads) shall have at least fifty percent (50%) time/wear remaining
before the next overhaul or replacement as recommended by the manufacturer and
published in standard maintenance manuals.
(f) Engine: The engine must have been maintained in accordance with
manufacturers recommendations, including overhauling the engine as required. At
the time of redelivery, the engine must have at least fifty percent (50%) time
remaining before the next overhaul or replacement as recommended by the
manufacturer and/or published in standard maintenance manuals. Determination of
satisfaction of these specifications shall be made by subjecting the Engine to
standard industry testing to include (but not limited to) testing of the
crankcase, manifold pressure, oil analysis and blowby tests. All tests shall be
performed by a manufacturer authorized service center.
(g) Brakes: The brakes shall have at least fifty percent (50%) time
remaining before the next overhaul or replacement as recommended by the
manufacturer and/or published in standard maintenance manuals. No drums or other
braking components shall be damaged or cracked.
(h) Booms: If so equipped, all booms shall be straight and true within
original manufacturers specifications and tolerances. All standard rigging
including sheaves, pendants, fairleads necessary for industry standard lift
crane and boom trucks shall be returned with each machine.
(i) Hydraulic Equipment: All hydraulic pumps, cylinders and hoses must
be fully operational at rated capacity with no leaks.
(j) Documents and Records: Each such unit shall meet and conform to all
applicable federal, state, and local health and safety laws and requirements,
and, if applicable, have appropriate ANSI inspection certificates, permits and
other certification necessary to operate the Equipment. Without limiting the
foregoing, Lessee shall maintain and provide to Lessor written records of
preventative maintenance and repairs, indicting date, and (hobbs) hourmeter
readings to show when such maintenance or repair work was performed.
(k) Redelivery: Provide for transportation of the Equipment in a manner
consistent with the manufacturer's recommendations and practices to any
locations within Continental North America as Lessor shall direct; and shall
have the Equipment unloaded at such locations.
(l) Storage: Provide safe, secure, storage for the Equipment for a
period of up to three hundred sixty-five (365) days after expiration or early
termination of the Lease at a locationsatisfactory to Lessor.
INSPECTIONS:
(a) At Lessors expense, at least three hundred sixty-five (365) days
prior to, and not more than four hundred fifty-five (455) days prior to
expiration of the Term, each item of Equipment must be inspected by a
manufacturers authorized maintenance representative or other qualified
maintenance provider (acceptable to Lessor) to ensure the Equipment conforms to
the return provisions outlined herein
(b) From three hundred sixty-five (365) days prior to the return of the
Equipment, Lessee must make the Equipment available to Lessors agent during
regular working hours so walk-around appraisals/inspections can be conducted.
(c) The results of the testing and appraisal with necessary
reconditioning documenting that the Equipment meets the return conditions
required herein are to be provided to Lessor three hundred sixty-five (365) days
prior to the return of the Equipment.
During the term of this Lease, the Equipment shall not be used more than
six thousand (6,000) hours per year. The Lessee shall pay to Lessor upon return
of the Equipment the sum of $__twenty-seven ($27.00) dollars per hour or
fraction thereof for the excess hourly usage.
<PAGE>
H. PAYMENT AUTHORIZATION
You are hereby irrevocably authorized and directed to deliver and apply the
proceeds due under this Schedule as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
COMPANY NAME ADDRESS AMOUNT
- ----------------------------------------------------------------------------------------------------------------
Stillwater Mining Company 717 17th Street, Suite 1480, Denver, CO 80202 $6,960,104.54
</TABLE>
This authorization and direction is given pursuant to the same authority
authorizing the above-mentioned financing.
I. Section 19 (f) of the Agreement is not applicable to this Schedule
Except as expressly modified hereby, all terms and provisions of the
Agreement shall remain in full force and effect. This Schedule is not binding or
effective with respect to the Agreement or Equipment until executed on behalf of
Lessor and Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION STILLWATER MINING COMPANY
By: /S/ BOB LEE By: /S/ JAMES A. SABALA
- ------------------------------------ -----------------------------------
Name: Bob Lee Name: James A. Sabala
- ------------------------------------ -----------------------------------
Title: Credit Analyst Title: VP & CFO
- ------------------------------------ -----------------------------------
ATTEST
By: /S/ LISA MAESTAS
-----------------------------------
Name: Lisa Maestas
-----------------------------------
<PAGE>
ADDENDUM
TO SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 10, 1998
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above
referenced schedule (the "SCHEDULE") to the above referenced lease (the
"LEASE"), between GENERAL ELECTRIC CAPITAL CORPORATION ("LESSOR") and STILLWATER
MINING COMPANY ("LESSEE") and is hereby incorporated into the Schedule as though
fully set forth therein. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Lease.
For purposes of this Schedule only, the Lease is amended as follows:
(A) The following is substituted in place of Section 18 of the Lease:
18. END OF BASIC TERM OPTIONS:
At the expiration of the Basic Term (the "BASIC TERM EXPIRATION
DATE"), so long as no default has occurred and is continuing hereunder and this
Agreement has not been earlier terminated, Lessee shall exercise one of the
following options:
a. Renewal Option.
--------------
(i) Lessee may, upon at least ninety (90) days, but not more than one
hundred eighty (180) days, prior written notice to Lessor, extend the term of
the applicable Schedule with respect to all (but not less than all) of the
Equipment in such Schedule for a period to be mutually agreed upon by both
Lessor and Lessee (the "RENEWAL PERIOD") for a scheduled monthly rental equal to
the monthly Fair Market Rental Value thereof determined as of the end of the
Basic Term.
(ii) The term "Fair Market Rental Value" shall mean the price which a
willing lessee would pay for the rental of the Equipment in an arms-length
transaction to a willing lessor under no compulsion to lease for a time period
similar to the Renewal Period; provided, however, that in such determination:
(i) the Equipment shall be assumed to be in the condition in which it is
required to be maintained and returned under this Agreement; (ii) in the case of
any installed additions to the Equipment, same shall be valued on an installed
basis; and (iii) costs of removal of the Equipment from the current location
shall not be a deduction from such valuation. If Lessor and Lessee are unable
to agree on the Fair Market Rental Value at least sixty (60) days prior to the
Basic Term Expiration Date, Lessor shall appoint an independent appraiser
(reasonably acceptable to Lessee) to determine Fair Market Rental Value, and
that determination shall be final, binding and conclusive. Lessee shall bear
all costs associated with any such appraisal.
(iii) Lessee shall be deemed to have waived this option unless it
provides Lessor with written notice of its irrevocable election to exercise the
same within fifteen (15) days after the Fair Market Rental Value is determined
(by agreement or appraisal).
b. Purchase Option.
---------------
(i) Lessee may, upon at least ninety (90) days, but no more than one
hundred eighty (180) days, prior written notice to Lessor, purchase all (but not
less than all) of the Equipment in any Schedule on an AS IS BASIS, without
recourse to, or warranty from, Lessor for the then Fair Market Value of the
Equipment (plus all applicable sales taxes). On the Basic Term Expiration Date,
Lessor shall receive, in cash, the full purchase price (plus all applicable
sales taxes) together with any Rent or other sums then due under the applicable
Schedule on such date.
(ii) The term "FAIR MARKET VALUE" shall mean the price which a willing
buyer (who is neither a lessee in possession nor a used equipment dealer) would
pay for the Equipment in an arm's-length transaction to a willing seller under
no compulsion to sell; provided , however , that in such determination: (i) the
--------- --------
Equipment shall be assumed to be in the condition in which it is required to be
maintained and returned under this Agreement; (ii) in the case of any installed
Equipment, that Equipment shall be valued on an installed basis; and (iii) costs
of removal of the Equipment from the current location shall not be a deduction
from such valuation. Lessee shall appoint an independent appraiser (with at
least one current professional designation and reasonably acceptable to Lessor)
to determine Fair Market Value, and that determination shall be final, binding
and conclusive. Lessee shall bear all costs associated with any such appraisal.
Notwithstanding any provision to the contrary herein, in no event shall the Fair
Market Value be less than thirteen percent (13%) of the applicable Capitalized
Lessor's Cost for the Equipment ( plus any applicable sales taxes or charges).
(iii)Lessee shall be deemed to have waived this option if it fails to
timely provide Lessor with the required written notice of its election to
exercise the same or unless it provides Lessor with written notice of its
irrevocable election to exercise the same within fifteen (15) days after the
Fair Market Value is determined (by appraisal).
c. Return Option. In the event Lessee fails to exercise the renewal
or purchase option referred to above, Lessee shall return all
(but not less than all) of the Equipment pursuant to the terms of
Agreement and the applicable Schedule, including, without
limitation, any and all return conditions. Lessee agrees that if
it elects to return the equipment for the first Schedule, Lessee
shall be deemed to have
<PAGE>
elected to return all other Schedules under this Agreement in
which General Electric Capital Corporation is the "Lessor".
Lessee shall be charged a 5% restocking fee upon return of the
equipment.
The following is substituted in place of Section 17 of the Lease:
17. EARLY PURCHASE OPTION.
(a) Provided that the Lease has not been earlier terminated and
provided further that Lessee is not in default under the Lease or any other
agreement between Lessor and Lessee, Lessee may, UPON AT LEAST 60 DAYS BUT NO
MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE
ELECTION TO EXERCISE SUCH OPTION, purchase all (but not less than all) of the
Equipment listed and described in this Schedule on the rent payment date (the
"EARLY PURCHASE DATE") which is 72 months from the Basic Term Commencement Date
of the Schedule for a price equal to $2,053,230.84( the "FMV EARLY OPTION
PRICE"), plus all applicable sales taxes on an AS IS BASIS. Lessor and Lessee
agree that the FMV Early Option Price is a reasonable prediction of the Fair
Market Value (as such term is defined in Section 18(b) hereof) of the Equipment
at the time the option is exercisable. Lessor and Lessee agree that if Lessee
makes any non-severable improvement to the Equipment which increases the value
of the Equipment and is not required or permitted by Sections 7 or 9 of the
Lease prior to lease expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase price to reflect any
addition to the price anticipated to result from such improvement. (The
purchase option granted by this subsection shall be referred to herein as the
"EARLY PURCHASE OPTION".)
(b) If Lessee exercises its Early Purchase Option with respect to the
Equipment leased hereunder, then on the Early Purchase Option Date, Lessee shall
pay to Lessor any Rent and other sums due and unpaid on the Early Purchase
Option Date and Lessee shall pay the FMV Early Option Price, plus all applicable
sales taxes, to Lessor in cash.
Except as expressly modified hereby, all terms and provisions of the
Lease shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease or the Equipment until executed on behalf of
Lessor and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION STILLWATER MINING COMPANY
By: /S/ BOB LEE By: /s/ JAMES A. SABALA
-------------------------------- --------------------------------
Name: Bob Lee Name: James A. Sabala
------------------------------ ------------------------------
Title: Credit Analyst Title: Vice President and CFO
----------------------------- -----------------------------
Attest:
By: /s/ LISA MAESTAS
--------------------------------
Name: Lisa Maestas
------------------------------
<PAGE>
[LETTERHEAD OF BEHRE DOLBEAR & COMPANY, INC.]
October 12, 1998
Exhibit 23.1
Stillwater Mining Company
1200 Seventeenth Street
Suite 900
Denver, CO 80202
Ladies and Gentlemen:
We hereby authorize the reference to Behre Dolbear & Company, Inc. ("Behre
Dolbear") and the Mineral Inventory of Stillwater Mining Company as of January
1, 1998 prepared by Behre Dolbear, in the Prospectus Supplement to the
Prospectus contained in the Registration Statement on Form S-3 of Stillwater
Mining Company, to be filed with the United States Securities and Exchange
Commission.
We also confirm that we have read the description of the Stillwater Mining
Company ore reserves as contained in the Prospectus Supplement and have no
reason to believe that there is any misrepresentation in the information
contained therein that is derived from our report or known to us as a result of
services we performed in connection with the preparation of such report.
Sincerely,
BEHRE DOLBEAR & COMPANY, INC.
/s/ SIGNATURE ILLEGIBLE
Bernard J. Guarnera
President, Chief Executive Officer and
Chief Operating Officer
BJG/tfr
PJ97-54
<PAGE>
Exhibit 23.2
October 12, 1998
Stillwater Mining Company
1200 Seventeenth Street
Suite 900
Denver, CO 80202
RE: STILLWATER MINE AND CONCENTRATOR PRODUCTION EXPANSION STUDY
Ladies and Gentlemen:
We hereby authorize the reference to our firm and to the Stillwater Mine and
Concentrator Production Expansion Study, dated March 1998, prepared for
Stillwater Mining Company by H.A. Simons Ltd., in the Prospectus Supplement to
the Prospectus contained in the Registration Statement on Form S-3 (Reg. No.
333-58251), to be filed with the United States Securities and Exchange
Commission.
We also confirm that we have read the descriptions of the Stillwater Mine and
Concentrator Expansion Study as contained in the Prospectus Supplement and have
no reason to believe that there is any misrepresentation in the information
contained herein that is derived from our reports or known to us as a result of
services we performed in connection with the preparation of such reports.
Sincerely,
MRDI Canada, a Division of H.A Simons Ltd.
By: /s/ Stephen Hodgson
---------------------------------------
Name: Stephen Hodgson
Title: President
<PAGE>
Exhibit 23.3
October 12, 1998
Stillwater Mining Company
1200 Seventeenth Street
Suite 900
Denver, Co 80202
RE: Preliminary Mine Design and Cost Estimate Report
Ladies and Gentlemen:
We hereby authorize the reference to our firm and to the Preliminary Mine Design
and Cost Estimate Report, dated September 1998, prepared for Stillwater Mining
Company by Kilborn International, Inc., in the Prospectus Supplement to the
Prospectus contained in the Registration Statement on Form S-3 (Reg. No.
333-58251), to be filed with the United States Securities and Exchange
Commission.
We also confirm that we have read that portion of the descriptions of the East
Boulder expansion as contained in the Prospectus Supplement and have no reason
to believe that there is any misrepresentation in the information contained
herein that is derived from our reports or known to us as a result of services
we performed in connection with the preparation of such reports.
Sincerely
KILBORN INTERNATIONAL, INC.
By: /s/ J.M. SHIRLEY
-----------------------------------------
J.M. Shirley
Title: SNR VICE PRESIDENT AND GENERAL MANAGER
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Stillwater
Mining Company of our report dated February 28, 1998 appearing on page 31 of
Stillwater Mining Company's Annual Report on Form 10-K for the year ended
December 31, 1997. We also consent to the references to us under the headings
"Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
October 12, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 6,658 6,658
<SECURITIES> 0 0
<RECEIVABLES> 16,375 16,375
<ALLOWANCES> 0 0
<INVENTORY> 8,035 8,035
<CURRENT-ASSETS> 35,479 35,479
<PP&E> 275,464 275,464
<DEPRECIATION> (61,684) (61,684)
<TOTAL-ASSETS> 251,737 251,737
<CURRENT-LIABILITIES> 18,491 18,491
<BONDS> 60,491 60,491
0 0
0 0
<COMMON> 207 207
<OTHER-SE> 152,326 152,326
<TOTAL-LIABILITY-AND-EQUITY> 251,737 251,737
<SALES> 28,198 76,234
<TOTAL-REVENUES> 28,198 76,234
<CGS> 17,178 49,698
<TOTAL-COSTS> 21,541 61,608
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 645 2,550
<INCOME-PRETAX> 6,161 12,738
<INCOME-TAX> (2,371) (4,904)
<INCOME-CONTINUING> 3,790 7,834
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,790 7,834
<EPS-PRIMARY> 0.18 0.38
<EPS-DILUTED> 0.18 0.38
</TABLE>
